Airlines Brace for Busy Thanksgiving Travel Season. There's a Twist This Year. -- Barrons.com
Dow Jones Newswires November 21, 2022 07:13:00 AM ET
Airlines are gearing up for a busy but slightly different Thanksgiving holiday travel season this year, with passenger numbers expected to close in on prepandemic levels.
More than 4.5 million people are expected to fly over the five-day period from Wednesday Nov.23 to Sunday Nov.27, according to AAA forecasts. That is an 8% increase on 2021 and around 98% of 2019 levels, the travel association said.
But the holiday travel surge appears to have already begun, which is earlier than normal, with strong passenger numbers at the end of last week and into the weekend. That could be down to flexible remote working.
More than 2.3 million passengers passed through U.S. airports Thursday, according to Transportation Security Administration data, topping the Thursday before Thanksgiving in 2019. On Friday that figure hit 2.45 million passengers, beating even the peak travel days of 2021.
The TSA said last week it was expecting to screen up to and possibly more than 2.5 million passengers on what are typically the two busiest days -- Wednesday Nov.23 and Sunday Nov.27. That it has reached close to that already on a usually quieter day can only be a positive for airlines.
Cowen analyst Helane Becker said: "All the airlines should benefit from this [holiday] strength, especially as we expect Americans to again resume their travel to international destinations this holiday," noting that the strong dollar was also benefiting Americans traveling overseas.
Airline stocks broadly moved higher after the recent earnings season on better-than-expected fourth-quarter guidance so a strong holiday season is largely priced in but there is always room for a positive surprise if it proves to be even better than expected.
The Wednesday before Thanksgiving and the Sunday after are still expected to be the busiest days but travel demand looks robust on either side of the holiday week as well.
While that may mean many passengers don't pay the highest fares of the traditional peak days, the busiest days are still expected to surpass 2021 levels and come close to the prepandemic numbers of 2019. So airlines could potentially benefit from a prolonged period of strong demand.
The TSA anticipates the holiday period will be busier than in 2021 and "probably very close" to the prepandemic highs of 2019.
The busiest day on record for the TSA remains the Sunday after Thanksgiving in 2019, when its officers screened close to 2.9 million passengers. On the same day in 2021 it recorded 2.45 million travelers.
Passenger numbers being up on last year but slightly below prepandemic 2019 levels is what the airlines are also anticipating.
Delta Air Lines (ticker: DAL) said it expects to carry close to six million passengers between Nov.18 and Nov.27, just below the 6.3 million people who traveled with the carrier over the same period in 2019. United Airlines (UAL) anticipates flying 5.5 million passengers between Nov.18 and Nov.30, 12% up on 2021 and around the same as it did in 2019.
Disruption
That there will be some delays and cancellations seems in little doubt -- there is even a betting market on which airline will cancel the most flights -- but to what extent is less certain.
Disruption swept across the sector last Christmas and new year period, and more recently this summer, as airlines struggled to cope with surging demand as Covid-19 restrictions eased.
More than 52,000 flights in to and out of the U.S. were canceled in June, July and August this year, more than 2% of scheduled flights, according to FlightAware data. In January this year, close to 39,000 flights, or 5.4% of the schedule, were canceled.
Carriers have since taken steps to avoid a repeat this holiday season. Delta, for example, said it has adapted its schedule, added a buffer time in crews' scheduling, and focused on hiring and training, in a bid to stabilize operations. Delta has been one of the best performing carriers this year, with just 1% of flights canceled, according to data from flight tracker FlightAware.
The hiring spree this year has been industrywide, in fact, as the sector adapts to strong demand. But other factors, including weather and air traffic control, are largely out of the airlines' hands.
Frontier Group (ULCC) management said last week it has rescheduled operations to mitigate problems stemming from potential air traffic control disruption at Florida's Jacksonville Center. Several airlines, including Frontier and Southwest Airlines (LUV) blamed Federal Aviation Administration staffing issues for delays and cancellations earlier this year. The FAA pushed back on those claims but has since increased hiring.
The FAA failed to immediately respond to a request for comment ahead of the holiday season.
Pilot contract disputes are also looming over the sector ahead of the holidays. Delta pilots voted to strike if negotiations over new contracts fail to succeed earlier this month. American and United pilots have also turned down pay deals. However, the protracted nature of the negotiations makes strikes over the holiday period extremely unlikely.
Hybrid work
While the direct impact of Covid-19 on vacation travel has been effectively grounded on the runway, its effects may still be felt in other ways this year.
"Right now, the hybrid work environments we are seeing allow the travel period to elongate to start the Thursday prior to Thanksgiving and go through at least the Sunday following the holiday," Cowen's Becker said, adding that she expects record travel this Thanksgiving.
Frontier noted a similar trend at its investor day last week, with outbound travel beginning as early as Thursday. "We're not seeing it quite as peaky," CEO Barry Biffle told analysts. "I think you're going to see that [in] the Christmas season for example and even the Thanksgiving season, it actually enables more people to travel."
TSA air travel data for recent days appears to back that up.
Fares
U.S. airlines have enjoyed bumper revenues in recent quarters as leisure travel demand has proved strong and international and corporate travel has picked up. Capacity constraints, including a nationwide shortage of pilots and aircraft delivery delays, coupled with pent-up demand for travel has enabled airlines to increase fares.
Travelers are expected to pay around $350 per ticket for a domestic Thanksgiving flight, according to online travel agency Hopper. That is 43% higher than last year and 22% higher than in 2019. Last-minute Thanksgiving prices could peak above $450, Hopper said last month.
Christmas airfares look likely to be higher still, with prices sitting at $430 last month and expected to rise slowly in November before spiking $10 a day from the middle of this month until the holiday. Last minute tickets could peak at above $580, it added.
All that means the revenue streak U.S. airlines are on could be set to continue, provided they can avoid damaging disruption and cancellations in the key days and weeks ahead.
Write to Callum Keown at callum.keown@barrons.com
(END) Dow Jones Newswires November 21, 202207:13 ET (12:13 GMT)
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