Don’t Be Misled: The Million Passengers Screened At U.S. Airports Doesn’t Signal A Comeback In Air Travel Demand

One million is a lot of people.

It’s enough to fill “The Big House,” the University of Michigan’s Michigan Stadium, 10 times over. It’s enough to fill the United Center in Chicago (the largest arena in the NBA) 51 times, or a big, 100-seat theater at your local multiplex more than 1,000 times.

But if we’re talking about airline passengers per day, a million people “ain’t nuthin’ ” as they say; certainly nothing to get excited about.

Yet the headlines the last couple of days screamed the news that 1,031,505 people passed through Transportation Security Administration airport checkpoints on Sunday. That marked the first time that more than a million people cleared TSA checkpoints in a single day since March 16.

That’s a good thing, one supposes, given the context of the exceptional decline in air travel demand this year in response to the Covid-19 pandemic. After all, TSA checkpoint screenings tumbled all the way down to a measly low of 87,534 on April 14 (or just 4% of the 2.2 million people who passed through TSA checkpoint on same day in 2019).

But, by comparison with last year’s numbers, a million such screenings this past Sunday, while better than a poke in the eye, means demand remains down a staggering 60% from a year earlier, on Oct. 18, 2019.

Still worse, with the potential exception of a few holiday travel days around Thanksgiving, Christmas and New Year’s Day, those airport screening totals are extremely unlikely to rise above the “down 50% from a year ago” comparison mark until sometime next summer, at the earliest.

In fact, it will be almost impossible for the number of travelers passing through TSA checkpoints to reach that 50%-of-last-year watermark over the next six to nine months – and maybe longer. That’s because U.S. airlines won’t even offer enough seats each day during that time span for travel demand to reach that high.

Four of the nation’s five largest airlines are offering well below 50% as many seats for sale this month as they did in October 2019 (and remember, on most days they don’t come close to filling even half of the deeply reduced number seats that they now are offering). Though they may have vague hopes of significantly increasing their capacity over the next six to nine months, all indicators are that such rebound is extremely unlikely to happen.

Only Southwest airlines still offers more than 50% of the seating capacity it did a year ago. The fabled maverick discount carrier has grown up. It’s been in business 49 years now (and this year will lose money for the first time in 48 years). And – get this – Southwest is now the world’s largest airline ranked by total number of available seats.

In normal times Southwest would rank a little lower in the seating rankings. That’s because it flies only narrow body Boeing 737s with just 175 or fewer seats. Before the pandemic, the U.S. Big Three carriers - Delta, American and United – operated between 150 and 200 widebody planes each.

To be sure, Southwest, like all airlines, has reduced its seating capacity in response to the pandemic, but only by 37%, to about 76.8 million seats this month. That’s according to new data from OAG, the British travel data company formerly known the Official Aviation Guide that publishes all flight schedules for the world’s more than 700 airlines.

American, meanwhile, has cut seating capacity by 59% from a October 2019, to just 45 million seats this month. Delta’s capacity is down by an even larger 64% to 40.4 million seats. And United has trimmed the number of seats it has on offer this month to only 21.5 million, down a whopping 74% from October last year. Even Alaska Airlines, a distant No. 5 in the ranking of U.S. airlines by all measures, has shrunk its number of seats available this month by 66% to just 10.1 million.

And from there the picture grows darker still. Those numbers are based on the scheduled services each carrier filed for the full month. But ever since the pandemic began impacting air travel demand in February carriers have been aggressive about cancelling and consolidating flights on short notice because demand was even weaker than they’d anticipated.

And’s that’s happening now. Earlier this month managers at most major airlines quietly began informing analysts and others that they are being more aggressive about canceling flights and reducing capacity this fall than they were during the summer months.

It’s also a safe bet that airlines – most of them anyway – will be quite conservative in scheduling their capacity deep into 2021. No doubt, that’s because their total third quarter losses are expected to reach as high as $15 billion (Delta and United reported big losses last week while American, Southwest and Alaska are expected to report today). Thus, the carriers can’t afford to continue offering lots more seats and flights than demand realistically can support.

Nor are they likely to bring back many, if any of the hundreds of planes they now have in storage. After grounding more than half of the U.S. commercial fleet in the spring, carriers did bring back some planes across the summer. As a result, the five largest U.S. carriers had 2,265 aircraft in service as of August, according to OAG. But another 1,481 of their planes remained in storage

And while that means 40% of their planes are in storage, an even larger percentage of their seats are out of service, likely for a long time. Southwest and Alaska operate only narrow body planes. But Delta, American and United own or lease 518 widebody planes (and that’s only after moving to retire around 100 older widebodies among them). At American, 94 of its 348 planes in storage are widebodies. At Delta 93 of its 512 stored planes are widebodies. And of United’s 466 planes out of service, 104 are widebodies.

Few, if any of those planes are likely to return to service before next summer. Mostly that’s because demand still doesn’t warrant their return despite the slow growth in demand that pushed the TSA checkpoint clearance total back above the 1 million-a-day mark (albeit, only on one day thus far). But it’s also because, in part, the airlines no longer have the personnel necessary to operate any more planes.

The industry laid off more than 32,000 people earlier this month after the expiration of the federal prohibition against layoffs that the airlines agreed to in return for $25 billion in grants offered them by Congress in March. But even before that big layoff event happened two weeks ago airlines already had eliminated tens of thousands of other jobs. They used financial incentives to get employees to retire early, take indefinite unpaid leave, or simply to quit. As a result, they won’t be able to start throwing more planes into the sky quickly or cheaply when or if the pace of demand recovery quickens. Employees would have to be brought back in, re-trained and re-certified for their jobs in the air and on the ground. And planes long in storage would have to be re-checked, repaired and re-certified to fly. All that could take months.

And even if the airlines could do all of that quickly and cheaply, travel demand simply isn’t going to come roaring back any time soon.

Even the top officials at the airlines themselves warn that a real surge in demand won’t begin until a vaccine or vaccines for Covid-19 are widely distributed and in use. There are hopeful reports that the first vaccine could be approved for use by humans before year’s end. But even then, it likely will take months, if not a year to fully accomplish in the domestic market, and probably longer for it to happen in many foreign markets.

A challenge just as big, or bigger, is likely to be getting places that leisure and business travelers alike will actually want or need to visit to re-open.

Domestically, many locations still have significant barriers to travel like state and local quarantine laws and restrictions on the size of public gatherings. Lots of hotels and restaurants have closed, permanently or temporarily, which makes planning travel more complicated and actual travel more challenging. Lots of tourist attractions remain closed while others have greatly limited their hours of operations, the numbers of people allowed to visit at one time, or the access to certain features or amenities. Plus, lots of sales people, consultants, customers and service people cannot visit their customers or clients because most or all of the workers with whom they would meet are working remotely.

Beyond that, corporate leaders increasingly are focusing on long-lasting, if not permanent shifts in what consumers want and how they acquire it and what that will mean for how they conduct business in the future. In the view of some, that means they likely will be shifting some spending from travel (both for sales and services purposes, and for internal management and training purposes) to digital means of communication. That doesn’t mean that sales and service business travel will cease, but that some, perhaps significant percentage of such travel will shift. Some of that work will shift long-term to using Zoom or other teleconferencing technologies. Some will be shifted to using internet “cloud” data sharing and systems management tools. And many companies already are looking into ways that they can reduce corporate traveling spending by using more freelance service people who live near major client or by re-locating sales and service people to the area where their big customers are headquartered. Such steps would reduce or even eliminate companies’ need to send personnel out to make in-person calls on customers and clients.

Just this week The Conference Board business think tank and its affiliate, The Business Council forum for the CEOS of many of the nation’s largest corporations, said that while there’ increasing business confidence in the U.S. this fall, economic growth is expected now to be slower than previously projected.

CEOS entered the fourth quarter “significantly more upbeat than they were earlier this year,” said Dan Peterson, the Conference Board’s chief economist. “Nonetheless, uncertainty around the pandemic -and its aftermath – remains a risk… as we enter 2021.”

Eight out of 10 CEOs involved with the Conference Board said accelerating digital transformation will be one of the key legacies of Covid-19. And 45% said they now feel the need to rethink their companies entire business models.

The Business Council’s vice chairman, Roger W. Ferguson Jr. said that though the fourth quarter “saw a resurgence of optimism, leaders are also cognizant of - and planning for – what may be permanent shifts in consumer preferences and organizational expectations ahead.” Ferguson, a former vice chairman of the Federal Reserve Board, is President and CEO of TIAA-CREF.