Taking Flight: How the airline industry is recovering from the Covid-19 pandemic
By: Jeremy Ng
On April 16, 2020, 95,085 people passed through Transportation Security Administration (TSA) checkpoints, far fewer than the 2.6 million people who did so one year earlier. Just under three weeks earlier, the Centers for Disease Control and Prevention (CDC) issued a travel advisory urging residents of New York, New Jersey, and Connecticut to avoid domestic travel for fourteen days due to rising COVID-19 cases. Now, over one year since the start of the COVID-19 pandemic, demand for airline travel has increased significantly, with the TSA screening just over 10 million passengers between July 1 and July 5, 2021, an average of over 2 million passengers per day. Airlines, especially those operating in the domestic market, have rebounded strongly since the onset of the pandemic, but the Delta variant will continue to cast uncertainty in the travel industry.
The rebound in demand for airline travel has been sharp, even causing some airlines to instate measures, such as cancellations and employee incentives, to keep up. With Americans forced to stay at home due to the pandemic, many are itching to finally venture somewhere new or see loved ones living elsewhere. Loosening restrictions have allowed Americans to travel more freely, and all major U.S. airlines have re-introduced the middle seat, with Delta Air Lines being the last carrier to do so on May 1, 2021. Ed Bastian, the Chief Executive Officer of Delta Air Lines, cited the airline’s expectation for COVID-19 vaccination rates among their past customers in their decision to reinstate the middle seat. Increase in demand has been particularly intense this past summer. By June 2021, planes were 83% full on average, and U.S. carriers were expected to fly more than 88 million passengers in July. As a result, some airlines had trouble keeping up. Over the fourth of July weekend in 2021, both Southwest and American Airlines cancelled or delayed many flights, and unions argued that the airlines planned too many flights with too few pilots. Because many employees took time off after the fall of 2020 when airlines were still struggling, many pilots were grounded and a backlog in pilot training ensued. Additionally, many pilots had already decided to retire early. Bad weather over the fourth of July weekend only made scheduling worse for the two airlines. In order to meet demand, Southwest increased their minimum pay to $15 per hour to incentivize individuals to join their workforce, and the airline began offering double-time pay for employees such as flight attendants and ground and cargo operations staff. On the other hand, some airlines, such as United, had fewer issues keeping up with demand this summer. Although United’s pilots worked fewer hours and received less pay over the past year, the airline kept all their pilots flying. Therefore, the airline suffered fewer training backlogs and already had employees on its team.
While travel has increased dramatically, airlines operating in the U.S. domestic market are faring much better than those focused on international routes. In the U.S., 60 percent of all air travel is domestic, much greater than other countries, in which only 10 percent of all air travel is domestic. With U.S. air travel leading up to the fourth of July weekend surpassing pre-pandemic levels, it seems likely that major American carriers may soon recover. Although United reported a second quarter net loss of $434 million, the loss was around four times as small as its second quarter loss from the year prior. United also predicts that it could become profitable in the third quarter. Meanwhile, international tourism, which is still much below pre-pandemic levels, will likely not fully recover soon due to varying travel restrictions and requirements across countries. In Israel, plans to admit individual vaccinated tourists were delayed in May due to the rise in cases from the Delta variant. Despite Hong Kong and Singapore’s governments’ two attempts to establish a travel bubble, one was never established. Within the European Union alone, over twelve member countries planned to go against the European Union’s policy by accepting the Covidshield vaccination as a proof of immunity. Unlike U.S. airlines, which have not had to sell any stake to the government during the pandemic, some foreign carriers have had to sell stake to their respective home governments. For instance, Alitalia is now completely owned by the Italian government.
Although travel is recovering, the Delta variant will continue to cause unpredictability in the industry. In regards to international travel, restrictions continue to exist for foreign citizens wishing to enter the United States. While fully-vaccinated American citizens may enter Canada beginning August 9, the Biden administration has kept in place the current border restrictions with the country. Similarly, the U.S. will continue imposing restrictions on non-U.S. citizens flying from Europe despite many European countries’ decision to permit vaccinated Americans to enter. Within the United States, some cities are also reimposing travel advisories in response to the Delta variant. In Chicago, unvaccinated individuals traveling from Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Hawaii, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nevada, Oklahoma, South Carolina, Tennessee, Texas, Utah, Wyoming, Puerto Rico, and the Virgin Islands were ordered to either have a negative COVID-19 test result no more than 72 hours before arrival or quarantine for ten days, as of August 3.
After a year of staying mostly inside, Americans want to travel again. Demand for flights this summer has been so high that some airlines have struggled to keep up. Some airlines needed to cancel or delay flights, and some implemented incentives for employees, such as higher wages. The rebound has not been even across all markets, though, with the American domestic market clearly faring much better than the international one. Still, uncertainties remain as the pandemic continues. The Delta variant may cause governments to reinstate restrictions, which would likely hurt the airline industry, as it did just over a year ago. Nonetheless, the airline industry appears to be in a much better state than it was at the beginning of the pandemic.