US airlines poised for long winter after brief holiday respite

U.S. airlines that enjoyed a jump in domestic travel during the recent holidays now face a potential double whammy as a seasonal slowdown combines with rising coronavirus cases.

Extending the gains through Martin Luther King Day on Jan. 18 and Presidents Day in February “appears challenging, given elevated new Covid case counts,” said Savanthi Syth, a Raymond James Financial analyst. About 1.3 million people passed through U.S. airport checkpoints Jan. 3, the most since mid-March, according to the Transportation Security Administration.

Increased travel in late December and early January may even make things worse this month by spurring new infections after a holiday season of social gatherings, said Joe DeNardi, an analyst at Stifel Financial. An increase in coronavirus cases would hit battered airlines just as the industry enters the first quarter of 2021, which is traditionally the weakest time of any year for travel demand.

“TSA data continues to show a more robust holiday travel season than previously anticipated,” DeNardi said in a report Monday. “This, however, may result in a more severe post-holiday surge in Covid cases, which could negatively impact travel trends over the next two-plus months until vaccines are more widely distributed.”

Daily flyers averaged 1.07 million daily over the past seven days, or 47% of their levels a year earlier. By comparison, passengers during the first half of December were less than 35% of year-earlier totals. Screened passengers during all of 2020 were just 39% of the 2019 level, the TSA said in a statement.

Travel Warnings

The passenger gains in late December and early January occurred against a backdrop of warnings against travel and large gatherings as coronavirus cases and hospitalizations rose across the U.S.

Almost 231,000 new cases were reported in the U.S. on the Thursday before the holiday weekend, when reporting can be sporadic. Four states—including New York and California—have surpassed 1 million infections overall, and more than 350,000 Americans have died.

“We continue to believe there is significant pent-up demand for air travel; that demand is just unlikely to materialize in the first quarter,” DeNardi said.

Delta Air Lines Inc. Chief Executive Officer Ed Bastian warned employees last week that “the next few months may be the most difficult yet.” The rising availability of Covid-19 vaccines will define two distinct phases for passenger totals this year, he said.

“The first will look a lot like 2020, with travel demand deeply depressed and our focus on ensuring the health and safety of our people and customers,” he said. “The second phase will begin only when we reach a turning point with widely available vaccinations that spur a significant return to travel, particularly business travel.”

The administration of vaccines in the U.S. has failed to meet projections, although the pace has begun to pick up recently. Meanwhile, a new more infectious strain of the virus is starting to spread in the U.S.