Six weeks ago I wrote that recovery in travel could be expected to stall out in the fall.
- As kids go back to school leisure travel would begin to dry up. That traditionally happens anyway.
- Normally business travel picks up the slack, but business travel will only return gradually.
- The Delta variant would depress travel, both because some people might become less inclined to travel and because some jurisdictions would bring back restrictions that make the destination less appealing.
The Delta variant also has some businesses delaying return to office. Without workers in offices full time, they’re not going to be having visitors. They’re also less likely to require travel, both to conferences and clients but also to bring remote workers together.
I also suggested at the time, by the way, that the Delta variant could infect 36 million people in the U.S. and cause the mask mandate to be extended. A couple of weeks ago airline CEOs started talking about their hope to see the mask mandate end, another that having this requirement on travel (which once might have given people confidence to fly) is bad for business.
The stalling out in travel is what we appear to be seeing already, with forward purchases. (HT: @crucker)
JPMORGAN: “Retail spending outcomes have fallen short of our .. model in recent months. Our US card data reinforces this note of caution, showing a loss of momentum for airline spending and leveling off for restaurant spending this quarter.” $XAL pic.twitter.com/Tgt1VU0pLF
— Carl Quintanilla (@carlquintanilla) August 10, 2021
While in some sense limited by international travel restrictions, airline capacity remains flat among U.S. carriers at down 15% to pre-pandemic levels. A continued growing domestic air travel segment might lead to greater recovery with more full utilization of planes locally that aren’t being sent abroad.
TSA checkpoint numbers remain stalled out at less than 80% of 2019 – and that’s before the end of summer, back to school, and a decline in future booking spend.
And now Southwest Airlines is warning of lower bookings and rising cancellations and they no longer project profitability this quarter.