United Airlines reported on it earnings call Wednesday that they came to an agreement with Boeing not to take 737 MAX deliveries in 2022. They’re putting off as much capital investment as they can – they project $700 million total in the last 9 months of 2020, excluding $1 billion for the current value of aircraft leases that gets capitalized.
We aren’t going to see a lot of new investment at United for awhile, with the airline expecting to restore its balance sheet – pay down debt – before making big investments.
However when the travel recovery comes, CEO Scott Kirby says “the recovery is going to be quick.”
- While in May and early June the bookings they were getting happened relatively high to departure (such as three days out), that demand has tapered off.
- They’ll build to a plateau of 50% of last year’s demand. He doesn’t know how long it will take to get there, but he expects it to stay there for awhile and not grow further.
- That’s because while the airline expects “reasonable recovery” in “visiting friends and relatives” travel, other leisure travel won’t be back to 100%, and business demand will only start to come back, including “small group stuff” but large conventions and conferences aren’t going to be happening any time soon.
- The rest of the recovery comes “with a widely available vaccine” though it’s not clear when that is – there are several vaccine candidates entering late-stage trials but by the time they’re scaled up and distributed to enough people to be broadly protective it could take awhile. United is expecting that’s late 2021, but hoping it could be earlier. (I’ve written I expect it to be mid-2021.)
It seems what United is saying is that we’ll gradually reach the point at which the recovery comes quickly.
In the meantime the airline is seeing an increasing number of its frequent flyers traveling again, though for leisure trips and not business trips and though there are still “a higher percentage of non-[MileagePlus] members on board” than there used to be. The gradual return of their core customers is encouraging.
Kirby continues to evangelize the safety of air travel, suggesting that actually being on a plane is one of the safest indoor environments given frequent replenishing of outside air and hospital-grade filters. The point that probably isn’t debatable is that on a relative risk basis flying is still safer than driving long distances. Of course it’s easier to drive home to quarantine if you’ve been exposed to someone with Covid-19 than it is to stay put, since you cannot simultaneously self-quarantine and fly.