NEWS SERVICES | Despite higher airfare prices, consumers still want to travel

by Lori Aratani / The Washington Post

15:58 JST, October 14, 2022

A chaotic summer travel season and higher ticket prices have not dampened enthusiasm for flying, boosting airlines’ bottom lines as they rebuild their operations and focus on reliability ahead of the critical holiday travel season.

One sign of that continued enthusiasm came Thursday, when Delta Air Lines reported record sales for the third quarter, resulting in a $695 million profit. The carrier is operating fewer flights than in 2019, but strong demand has pushed ticket prices higher, boosting profitability.

The carrier’s optimism follows a bumpy few months for the industry, a period that attracted the attention of lawmakers and regulators amid a surge in flight delays and disruptions. The results are another milestone for airlines’ recovery in the third year of a pandemic that nearly grounded air travel and prompted tens of thousands of workers to leave the industry.

Delta is the first carrier to report earnings, while others are scheduled to do so in the coming days. The Atlanta-based carrier’s finances offered an early glimpse into the health of the industry during a typically slow period before the busy end-of-the-year travel season.

Delta chief executive Ed Bastian said during an earnings call Thursday that consumers may be cutting back in some areas of their lives, but he sees no signs that the two-plus years of pent-up demand that filled airports over the summer is waning.

“Demand is not coming close to being quenched by a hectic summer travel season,” he said.

Another sign of continued demand: the number of passengers screened by Transportation Security Administration officers at the nation’s airports on many days this year continues to surpass the number screened in 2021.

Other carriers are also signaling they expect to see strong financial results for the quarter. In a filing with the Securities and Exchange Commission, American Airlines, the world’s largest carrier, said it expected revenue would be up 13 percent in the third quarter, compared to the same quarter in 2019.

Concerns about the pandemic’s effect on operations appear to be fading across the industry. In recent days, airlines have announced multimillion-dollar investments in new technologies and expansions that include new routes.

Earlier this week, Delta announced it would invest $60 million in Joby Aviation, a maker of all-electric vertical takeoff and landing aircraft (eVTOL). The airline said it eventually hopes customers will use Joby’s battery-powered air taxis to fly rather than drive to the airport.

United Airlines, which will report earnings next week, announced in recent days that it plans to add new service to three cities next summer: Malaga, Spain; Stockholm and Dubai. It also will begin new service between Dulles International Airport and Berlin starting in May, while expanding service to European destinations it already serves, including Rome, Paris, Barcelona, London, Berlin and Shannon, Ireland.

But even as Delta was upbeat about its operations, there are still some segments where recovery is possibly years away.

Bastian said service to smaller communities is unlikely to return to pre-pandemic levels until 2024 or 2025. Many carriers, including Delta, have cut service to such markets as they sought to shore up finances and manage a pilot shortage further exacerbated during the pandemic as veteran aviators left the industry.

However, Bastian said staffing for Delta’s mainline operations has returned to pre-pandemic levels.

A spate of delays and cancellations early in the summer travel season led to heated exchanges and finger-pointing between airlines and the Federal Aviation Administration as each side tried to blame the other for the problems. The summer disruptions also led to greater scrutiny from consumer advocates, lawmakers and Transportation Secretary Pete Buttigieg, who repeatedly pressed airlines on what steps they were taking to improve service.

Last month, the Transportation Department unveiled a dashboard that outlines steps airlines will take when passengers are left stranded during a delay or cancellation.

The agency also has proposed rules that would clarify what it means for a flight to be “significantly” delayed or canceled and is moving to create protections for passengers who contract the coronavirus or other transmissible illnesses. Buttigieg has said more new rules are possible.

Even so, some analysts say reliability remains a question for carriers as the industry ramps up for what could be its busiest holiday travel season of the pandemic era.

“Carriers performed well in [the third quarter] despite a turbulent start to the summer, with delays, cancellations and traffic caps being imposed,” said Christopher Raite, a senior analyst at the research firm Third Bridge. “Looking ahead, our experts are cautiously optimistic about airlines’ ability to remain operationally efficient as the holiday season approaches.”

While Delta executives said Thursday that more business travelers are returning to the skies, much of the recovery continues to be fueled by leisure travel.

Aviation analyst Robert W. Mann, of R.W. Mann & Co., said airlines need to be realistic about how long they can depend on leisure travel. Delta said that it is seeing indications that business travelers are returning, saying such bookings are at 80 percent of pre-pandemic levels.

“People who would have spent on travel may have to start spending on real-world things – energy costs for example,” he said. “There are limits and you have to look [at] all the expenses that real people have.”