A JetBlue Airways Corp. plane taxis next to American Airlines Group Inc., Delta Air Lines Inc., and Alaska Airlines Inc. aircraft at Reagan National Airport (DCA) in Arlington, Virginia, U.S., on Monday, April 6, 2020.
Andrew Harrer | Bloomberg | Getty Images
The coronavirus pandemic has turned airlines’ most price-sensitive customers into a prize.
Airlines are dropping fees and reshaping their once-sprawling global networks to focus more on domestic vacation destinations as leisure travelers become more important. That’s on top of new rules, such as mandatory masks, put in place to entice travelers worried about flying during the pandemic.
Airlines’ shift comes after the virus grounded most business travel, along with many other areas of life, depriving the industry of what was its most lucrative group. Business travelers before the virus accounted for half of U.S. airlines’ revenue but just 30% of the trips, according to Airlines for America, an industry group that represents most U.S. carriers.
Eighty-five percent of respondents in a Global Business Travel Association study conducted Sept. 15-19 said they have canceled most or all business trips this year. Close to a third of the 1,364 people polled said they expect their employees to resume in-person events and conferences in the second quarter of 2021.
“The leisure traveler is the traveler today,” said Henry Harteveldt, president of Atmosphere Research Group and a former airline executive.
Airline CEOs have described the coronavirus as the industry’s worst crisis ever, and as the global pandemic surpasses the grim milestone of 1 million deaths, executives say they expect the disease to continue to limit travel until there’s a widely available vaccine.
To keep airlines afloat, the federal government in March approved a $25 billion aid package that prohibited airlines from cutting jobs. With the terms of the agreement expiring at the end of September, more than 30,000 workers are now at risk. Airlines are urging Congress and the Trump administration to approve another $25 billion as the pandemic drags on.
As they await Washington, airlines, particularly large carriers such as United, Delta and American, have been redrawing their maps away from once-lucrative international trips, as a web of travel restrictions has made much of the world off-limits for Americans. For example, United’s October capacity is 65% domestic, up from a 56% share a year ago. For U.S. travelers, Milan is out. The Rocky Mountains are in.
“We see a lot of people going to beaches and mountains that give you fresh air,” said Southwest‘s chief commercial officer, Andrew Watterson. “So Denver — Colorado in general has been pretty big.”
Passengers walk through Denver International Airport (DIA) on July 30, 2020, in Denver, Colorado.
Daniel Slim | AFP | Getty Images
Denver vaulted to become the busiest U.S. airport by passenger screenings in July, up from the fourth position last year, even though overall volumes were down 65% from 2019, according to TSA data provided by the airport. Los Angeles International this year fell to the No. 2 spot. Last year’s runner-up for busiest airport in July, Chicago O’Hare, fell to sixth place, and July 2019’s third-busiest, Atlanta, dropped a spot to fourth.
“We never rank No. 1,” said Denver International Airport spokeswoman Stacey Stegman. She said that’s to the credit of Denver’s focus on domestic service, local outdoor destinations and no competing large airports nearby.
Southwest added extra flights this summer to Las Vegas, Phoenix, Denver, Salt Lake City, Nashville, Tennessee, Panama City Beach and Fort Myers, Florida, beyond what it originally scheduled in order to meet demand.
Last month, United said it planned to add up to 28 nonstop flights to Florida over the end-of-year holidays to capitalize on sun-seeking vacationers.
The customers airlines are chasing are still scarce. The Transportation Security Administration screened an average of about 680,000 people a day this summer. During the peak season in 2019, they screened an average of more than 2.4 million people a day. Service is still drastically reduced from last year as airlines scramble to cut costs.
To attract passengers, carriers have implemented new safety precautions. All now require masks on board and say they have banned hundreds of travelers for refusing to comply. They have also enhanced their cleaning procedures, and Delta Air Lines, Alaska Airlines, Southwest Airlines and JetBlue Airways are blocking some seats on board to ensure more physical distancing between passengers.
Still, many vacationers are waiting to book until the last minute, with uncertainty about the virus, their work and school setups.
“What we are seeing is people choosing to make their reservations closer to departure time, so they know what’s going on,” said United Airlines‘ chief commercial officer, Andrew Nocella, in an interview.
Delta Air Lines CFO Paul Jacobson told an investor conference on Sept. 17 that leisure travelers are booking flights seven to 10 days ahead of time.
“Nobody is making plans out there because they don’t know what the outbreaks are going to be and they don’t know what’s open and so on,” he said. “But for somebody to say, ‘Yes. Next weekend, I might want to go to Disney World or Disneyland and it looks good. I’ll make plans, 10 days in advance.'”
Airlines are also loosening their ticket rules to try to entice more travelers, a reversal from the pre-Covid era when carriers came up with myriad fees. Since the start of the pandemic, airlines have been allowing customers to change dates without paying change fees into 2021. More recently, they’ve announced permanent changes. United late last month announced it was scrapping ticket-change fees, which could run $200, for standard economy bookings indefinitely. It also said it would allow free same-day ticket changes. American and Delta followed suit.
They haven’t completely abandoned passenger fees though. Atmosphere Research Group’s Harteveldt noted that most carriers still charge to check a bag or to select certain seats in advance.
“Eliminating change fees for North American travel and permitting free standby flight changes are the two biggest steps airlines have taken,” he said. “Their aggressive fare discounting during the summer also helped them. But this isn’t ‘The Wizard of Oz,’ and airlines aren’t always the good witch.”
Airlines are now facing the slower fall season without business travel to make up for the lack of vacationers. Thanksgiving and Christmas vacations generally boost demand, with many customers buying tickets months in advance to avoid sky-high fares. But with potential customers waiting longer to book and a second wave of the virus in the offing, the forecast remains cloudy.
“The question, of course, is what happens in the fall,” said Harteveldt.