Airlines see a rise in domestic flights and exceed forecasts

Aviation recovery is gaining momentum.

Summer travel pleasure exceeds expectations, allowing airlines to return to profits and brighten the outlook for the rest of the year. It’s a welcome relief for a battered industry and a sign that the rebound that started this spring seems to be here to stay.

The economic upturn, aggressive cost-cutting and a massive federal stimulus that has paid off many salaries have helped improve the finances of the largest airlines, which took on massive debt and lost billions of dollars during the pandemic.

According to Facteus, a research firm that monitors millions of online payments, consumer spending on airlines briefly surpassed 2019 levels this month for the first time since the start of the pandemic since the start of the pandemic. Ticket prices have also risen: in June, fares were just 1 percent. lower than the same month in 2019, according to the Adobe Digital Economy Index, which is similarly based on website visits and transactions.

And on Sunday, the Transportation Security Administration screened more than 2.2 million travelers at airport checkpoints, the most in a single day since the start of the pandemic.

Now that people have been vaccinated and things have reopened, the demand is just really, really strong and I think it’s generally stronger than people thought it would be, said Helane Becker, an aviation analyst at investment bank Cowen. People have money and time, and they use it to travel.

A full recovery rests on the return of two of the company’s mainstays, business and international travel, but executives said they expected both to improve significantly in the coming months. And while the Delta variant of the coronavirus could still pose a threat to travel recovery, customers have so far been undeterred.

We’ve seen no impact at all on bookings, United Airlines CEO Scott Kirby said this week during a call to discuss quarterly financial results with analysts and reporters. The most likely outcome is that the recovery in demand will continue largely unabated.

His comments matched those of executives at American Airlines and Delta Air Lines, who said in similar calls they hadn’t seen a drop in demand because of the variant. Both Delta and United added that a vast majority of employees and regular customers had received coronavirus vaccines, which appear to provide protection against the variant.

Rising demand has led to hiring across the industry. American said Wednesday it plans to hire 1,350 pilots by the end of next year, a 50 percent increase from previous plans. Last week, the company announced it planned to hire hundreds of flight attendants and recall thousands who had volunteered for long-term leave during the pandemic.

Southwest Airlines said in June it would raise its minimum wage to $15 an hour to retain and attract workers, while Delta is hiring thousands of workers. United last month announced plans to buy 270 new aircraft over the next few years, the largest aircraft order in its history and one that would create thousands of jobs across the country.

Southwest reported a $348 million profit on Thursday for the quarter ended June, its second profitable quarter since the start of the pandemic. American reported profits of $19 million for the same period, while Delta reported profits of $652 million last week, a pandemic first for any airline. United reported a loss this week but forecast a return to profitability in the third quarter as operations improved faster than forecast.

The financial turnaround was supported by a $54 billion infusion of federal aid to pay workers’ salaries over the past year and a half. Without those payments, none of the major airlines would have been able to report profits for the quarter ended June. Due to the support, the companies will not be able to pay a dividend until September 2022.

Each airline offered hopeful outlook for the current quarter. American predicted passenger capacity would decline only 15 to 20 percent from the third quarter of 2019, while United forecast a 26 percent decline and Delta forecast a 28 to 30 percent decline. Southwest, which differs from the other three major airlines in having few international flights, said it expected capacity to be comparable to the third quarter of 2019.

We’re just really excited about the momentum we saw in the numbers, US chief executive Doug Parker told analysts after the company released its earnings report.

Financial results and forecasts for the rest of the summer are the latest sign of strength in a comeback that has been underway for months. But the airlines have huge debts to pay back American, the airline with the most debt, announced a plan on Thursday to pay off $15 billion by the end of 2025, and the recovery has not been without its setbacks.

According to data from FlightAware, a flight-tracking company, passenger volumes have still fallen nearly 20 percent from prepandemic levels, and airlines suffered widespread delays and cancellations as passengers returned en masse last month. About 17 percent of Deltas flights were delayed by at least 15 minutes in June, along with more than 20 percent for United, more than 30 percent for American and 40 percent for Southwest.

While the rapid increase in travel demand in June stabilized our financial position, it impacted our business after an extended period of low demand, Southwest CEO Gary Kelly acknowledged in a statement on Thursday. That is why we are intensely focused on improving our operations while restoring our network to meet demand.

Carriers are also struggling to get workers in place to meet that demand. American was short of hospitality and wheelchair operators last month, while also accelerating pilot training to recover more than 3,000 from extended leave. Last week, Delta CEO Ed Bastian said the airline was struggling to train new or long-standing employees.

It takes a few months and demand has come back with such a quick clip, he said. It took all of us some time to catch our breath. But come back all the way in the coming months.

One form of travel, outings to visit friends or family within the United States, has generally recovered to 2019 levels, with Southwest saying such leisure trips surpassed 2019 levels in June.

Surveys show that this fall, when business travel tends to pick up, business travelers are increasingly eager to get back on the road. Nearly two-thirds of companies that have suspended business travel during the pandemic expect to bring it back in the next one to three months, according to a recent survey of the Global Business Travel Association, a trade association. However, if other companies follow Apple’s lead in delaying a return to the office, business travel recovery could be held back.

Delta expects domestic business travel to recover to about 60 percent of 2019 levels in September, from 40 percent in June. Those numbers roughly match United’s estimates.

Demand is recovering even faster than we’d hoped domestically, said Mr. Kirby of United Wednesday.

International travel is also slowly starting to recover as more countries, particularly in Europe, are opening up to US travelers who can provide proof of vaccination or a negative coronavirus test. But airlines are lobbying the Biden administration to ease in-kind restrictions, which they say will accelerate the recovery.

I think the wave is coming, and just as we’ve seen it on the consumer side, we were preparing for it on the business side, Delta’s Mr. Bastian said last week. Once you open businesses, offices and international markets, I think it’s going to be a very good run for the next 12 to 24 months.