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Aviation Blog

Airline Ticket Sales Exceed a 2019 Milestone for the First Time – The New York Times

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February bookings for U.S. travel beat those preceding the pandemic, a data analysis found. Summer looks promising for the industry, if fuel costs cooperate.
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Rising fuel prices may present an obstacle, but the airline recovery in the United States appears to be on track for now.
With the Omicron coronavirus variant receding and pandemic restrictions being eased, the airline industry turned a corner last month, according to an analysis by the Adobe Digital Economy Index, which draws on online sales from six of the top 10 U.S. airlines. According to the analysis, ticket sales for domestic flights in February exceeded those for the same month in 2019, a first since the pandemic began two years ago.
“We’re seeing things open up in terms of people’s thinking about travel,” said Vivek Pandya, who led the analysis. “The question now becomes: How much can that momentum continue to push forward?”
Travelers spent an estimated $6.6 billion on domestic flights in February, about 6 percent more than three years earlier, according to the analysis. The number of tickets sold was up 4 percent, while fares were up about 5 percent, lagging overall inflation. Early data indicate that the trends are holding up this month, too.
The data bodes well for airlines, which have been preparing for months for what the industry expects to be a robust summer travel season. It also matches the optimism that several carriers expressed at an investor conference held by J.P. Morgan on Tuesday.
At the conference, executives of American Airlines and Delta Air Lines said they saw record daily sales last week. In investor updates, Delta said it expected revenue for the quarter to slightly exceed its previous estimates, while United Airlines said corporate travel was improving faster than expected, reaching the highest level since the pandemic began. American said improvement in revenues would “more than offset” the increase in fuel prices, which have spiked since Russia went to war in Ukraine.
Southwest Airlines also improved its forecast, saying it expects operating revenue in the first quarter of this year to be down 8 to 10 percent from the same quarter of 2019. The airline previously forecast that operating revenues would be off 10 to 15 percent.
Consumers appear to be optimistic, too: The number of tickets sold last month for domestic travel between June and August was down just 3 percent from the number sold in February 2019, according to the Adobe analysis. Most travelers, though, book summer travel closer to the date of departure.
But while hopes are high for the months ahead, there is concern that rising fuel prices and persistent inflation could pressure airlines to raise fares and discourage potential customers from flying.
“Between the fuel impact and the discretionary income impact on leisure travelers, it’s going to slow whatever would have been happening,” said Samuel Engel, a senior vice president and airline industry analyst at ICF, an advisory firm.
JetBlue, for example, said in an investor update on Tuesday that it had “moderated” its flight plans for the first quarter of this year because of the rise in fuel costs. Still, it joined other airlines in upgrading its forecast: The airline expects revenue in the first three months of the year to be down 6 to 9 percent from the same period in 2019; its previous forecast was a decline of 11 to 16 percent.
Russia’s invasion of Ukraine sent oil prices soaring, raising the cost of jet fuel, which is one of the biggest line-item expenses for airlines. And while the global price of jet fuel has declined from its post-invasion peak, it ended last week up 19.5 percent from a month earlier and up about 82 percent over the last year, according to the Platts Jet Fuel Price Index.
American and United are particularly exposed to ballooning fuel costs, while Delta is somewhat insulated thanks to its refinery in Trainer, Pa. Southwest employs a financial strategy known as “hedging” to offset spikes in the price of fuel, which it estimated will cover as much as 64 percent of the fuel it could consume this year.
U.S. airlines will try to cover fuel-price increases by raising fares, a process that can take months to play out. Carriers are typically limited in how much they can pass on to customers, industry analysts said, but airline executives are more optimistic.
At the J.P. Morgan conference on Tuesday, Glen Hauenstein, the president of Delta, said the airline could “easily” increase fares in the second quarter to make up for rising fuel costs, faster than normal because customers are booking flights closer to the date of travel. On an average one-way ticket price of about $200, the airline will need to recover $15 to $20, he said. A United executive was similarly optimistic that the airline would be able to pass on fuel costs to customers in higher fares.
But with the rebound being led by leisure travelers, who are far more sensitive to ticket prices than corporate travelers, airlines will have to tread carefully when raising prices. Other options include cutting flights that are barely profitable or reining in plans to restore flights, as some airlines have already started to do.
“In general, growth may slow, or, as is the current case, capacity that airlines would have brought back if the pandemic continued to recede won’t return,” Helane Becker, an airline analyst at the investment bank Cowen, wrote in a recent research note.
At the same time, some consumers facing higher prices for goods and services may not have much left to spend on vacations, experts said. And while some budget carriers may target those travelers, there’s no guarantee that airlines will be willing to cut fares, especially when facing steep debt accrued during the pandemic and pressure from shareholders eager to see profits, said Henry Harteveldt, a travel industry analyst and the president of Atmosphere Research Group.
“Airline C.E.O.s are not in a generous state of mind these days, nor are their C.F.O.s, so I’m not expecting airlines to discount seats to the same extent that we may have otherwise seen,” he said. “I think that there’s a lot of pressure on airlines to keep their airfares as high they can.”
Depending on how Russia’s war on Ukraine plays out, airlines may also not see the rebound in lucrative trans-Atlantic travel that they had expected, either, experts said. But domestic and short-distance international travel has and will continue to lead the recovery. And despite the hurdles in the industry’s way, analysts and airlines are preparing for a strong summer season.
“What we’ll end up with is a domestic summer that looks very good as opposed to great,” Mr. Engel said.
As of Monday, airlines had more than 2.1 million domestic flights scheduled from June to August, according to Cirium, an aviation data provider. That figure could change substantially in the intervening months, but is currently just 8 percent lower than the number of flights scheduled over the same months in 2019. Last summer’s scheduled flights were down 16 percent from the summer of 2019.
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