US airlines hit bumps in recovery as COVID cases rise
Air travel recovery has hit some turbulence due to the rise in COVID cases in the United States, several major airlines reported on September 9, 2021.
Delta, United, American Airlines (A1G) (AAL), Southwest, JetBlue (JBLU), and Frontier all provided updates showing weaker than expected revenue trends and plans to moderate capacity for the final three months of the year.
“During the quarter, demand exceeded expectations in July. In early August, the pace of recovery paused due to the sharp rise in COVID cases,” Delta noted in a stock exchange filing.
The airline said it would still make an adjusted pretax profit for the three months to the end of September 2021, but that revenues would now be at the lower end of its previous guidance, citing a delay to business travel recovery.
However, United said the slowdown in bookings over the last few weeks means it will now fail to achieve its aim of an $82 million profit for the third quarter.
“As a result of the weakness in revenue that the company has experienced to date and expects to continue to experience, the company now expects an adjusted pre-tax loss in the third quarter of 2021 and if current trends continue, the company also now expects an adjusted pre-tax loss in the fourth quarter of 2021,” it commented.
“This weakness has continued into September and has resulted in a slowing of net bookings growth for close-in travel,” the airline noted.
It therefore revised down its profit expectations for the third quarter. It now expects its pretax margin excluding net special items will be between negative 10% and negative 14%, against a previous forecast for negative 3% and negative 7%.
However, American Airlines (A1G) (AAL) sounded a positive note, saying the third quarter would still be its best quarter as measured by revenue and pre-tax loss before special items, since the pandemic began. “The company’s booked load factor for peak travel periods, including the fourth-quarter holiday periods, remains very strong,” it added.
“DIFFICULT TO PREDICT”
Low cost carrier Southwest said operating revenues in August were near the lower end of its guidance range due to stuttering leisure demand and last-minute cancellations.
“The softness in leisure bookings has continued, thus far, for September and October 2021; however, managed business bookings are currently estimated to remain relatively stable compared with August 2021,” the airline said. Booking patterns for holiday travel in the fourth quarter are “fairly typical”.
Southwest therefore believes the recent revenue weakness will make it “difficult” to achieve a profit in the third quarter without the help of government payroll support programs.
Frontier Airlines also reported softening bookings since August, which it put down to increasing COVID cases. It predicts an adjusted net income margin of between negative 6% to 11% for the third quarter.
“The impact of the Delta variant on the Company’s bookings, and the duration of that impact, are difficult to predict,” it said.
JetBlue (JBLU) said it was now expecting revenue to fall by between 6% and 9% during the third quarter, compared with previous expectations for a fall of between 4% and 9%.
“Looking beyond the third quarter, the company is also seeing the recent bookings softness extend into the fourth quarter trough periods, though the company currently anticipates that leisure demand for peak holiday travel will hold up relatively well,” Jet Blue predicted.
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