Airlines warn sales could fall 30%, but investors see opportunity

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US airlines warned Thursday the travel industry’s slow climb back to normal could come crashing down as people stay close to home because of the rapidly spreading Delta variant.

Still, even as the airlines said ticket sales could be down as much as 30 percent from normal, investors sniffed a good time to buy and sent airline stocks broadly higher under the idea that life — eventually — will get back to normal and people will again take to the skies.

The expected dip in demand comes after air travel in July neared pre-pandemic levels. But as coronavirus cases tied to the ultra-contagious Delta variant surged, demand for airlines tickets dropped in August — and the downward trend is expected to continue through September, according to the airlines.

United Airlines, American Airlines, Southwest Airlines, Delta Air Lines and JetBlue told investors revenue would be down as much as 30 percent from the third quarter of 2019: United forecast a 33 percent decline, Delta said it sees a fall of 30 to 35 percent, American said it expected 24 to 28 percent drop, Southwest pegged an 8 to 20 percent fall and JetBlue said it could log a 6 to 9 percent dip.

Earlier this month, the Centers for Disease Control asked unvaccinated people not to travel and warned even those who are vaccinated to weigh the risks of traveling. Corporate travel, meanwhile, is still largely grounded — and could be delayed even further as large corporations like Microsoft and Amazon push out potential returns to the office.

Corporate travel can generate as much as 75 percent of an airline’s profit, according to a McKinsey report, because companies are more likely to pay top-dollar for flexible seats and last-minute bookings. That means its continued grounding is likely to continue to hit airlines in the pocketbook. A projection last month from Deloitte says in its best-case scenario, business travel will be back to only 45 percent of normal by the first part of next year.

Mark Hollyhead, chief operating officer at business travel company Egencia told The Post that companies largely are restricting travelers to essential trips. And as more rules have popped up around the country as the Delta variant spreads, companies have put on the brakes.

“When restrictions have been re-introduced, demand slows quickly,” he said.

But the stock price of airlines is painting a far rosier picture when it comes to the future of travel. Even as United, American, Delta, Southwest and JetBlue all revised their expectations downward in the short-term, their stocks flew higher.

The Dow Jones US Airline Index, which tracks airline stocks, closed up 3.26 percent on the day even as the broader market fell by more than 0.4 percent. Investors are betting airlines, while facing challenges in the next few quarters will make a full recovery.

“Several states have already peaked on [the] Delta [variant], and when the aggregate numbers fall, we are going to see a tsunami of bookings,” Thomas Hayes, chairman and managing member of Great Hill Capital, told The Post. “Business travel will come back shortly after offices are filled again,” he said, pegging the first quarter of next year as the time to look for a resurgence.

a sign that says face mask required
The ultra-contagious Delta variant has forced some of the largest U.S. airlines to revise their forecasts downward for the remainder of the year.
AP

Given the continued delay in bringing workers back to the office, it’s hard to predict when business travel will return — or if, when it does return, it will be back to levels seen in the past.

But according to recent data from the Global Business Travel Association, more than half of members and stakeholders say they expected, “a significant (8%) or moderate (47%) increase in the September to November 2021 time frame” when it comes to business travel.

GBTA CEO Suzanne Neufang said the Delta variant is a “detour” but overall “business travel continues to make progress and show small gains on the road to recovery.”

Another good sign for business travel: Several conferences — including SkyBridge Investment’s SALT conference and the Milken Institute’s global conference will be held in-person this year. Thousands of people have already registered to attend both events in person.

And data from Morning Consult shows small but positive signs among those traveling for leisure: According to its weekly survey released this week, 55 percent of US adults said they were “comfortable going on vacation.” That’s up one percentage point from last week — and was the first increase in eight weeks.

It’s not just US-based airlines that could see bluer skies in the distance. Europe’s largest carrier, Ryanair, expects travel to resume fully by summer of 2022 and is introducing new routes and purchased 55 new airplanes to keep up with expected demand.

Meanwhile, in the short-term, airlines are taking other measures to offset the decline in bookings. American Airlines announced a sale Thursday — with some flights to tropical destination costing as little as $60.



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