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U.S. airlines reported signs that travel demand is perking up, suggesting the beginnings of a rebound from an unprecedented collapse because of the coronavirus pandemic.
Bookings have resumed outpacing cancellations and reservations for next month are showing “modest improvement,” Southwest Airlines Co. said May 19. United Airlines Holdings Inc. reported reduced cancellation rates and “moderate” strengthening on U.S. and some international routes, while Delta Air Lines Inc. said it has seen a slight bounce in leisure bookings.
The nascent signs of recovery bolstered the outlook for at least a tentative comeback after consumers all but stopped flying in April because of the virus outbreak and government travel restrictions. Carriers cautioned that the landscape remains uncertain for an industry that already has received $25 billion in government payroll aid during the worst crisis in airline history.
The biggest U.S. airlines rose at least 2% each, after surges in May 18’s broad rally spurred by positive news about an experimental coronavirus vaccine. Southwest advanced 4.8% to $28.40 at 11:37 a.m. May 19 in New York, the fourth-best performance in the S&P 500. United climbed 2.2% to $24.67, while Delta rose 1.9% to $22.27.
Southwest said in a regulatory filing that operating revenue this month likely would decline no more than 90% from a year ago, slightly better than the previous forecast of a drop of as much as 95%.
The percentage of seats filled per plane should average between 25% and 30%, compared with about 8% in April. The Dallas-based carrier earlier projected the figure would be no more than 10% in May. The forecast for capacity remains down as much as 70% from last year’s level.
Southwest also issued its first outlook for June, forecasting that operating revenue would drop as much as 85% and that capacity would decline as much as 55%. With fewer planes flying, its number of seats filled was projected to be 35% to 45%.
The airline also is starting to get a grasp on spending, projecting it would burn $25 million a day on average this quarter, down from an earlier estimate approaching $35 million. Burning cash in the low $20 million range this month, Southwest said it would take about 20 months before its $13 billion in cash and short-term investments would be depleted.
Delta has seen a “little bit” of a bounce off the bottom, including an uptick in domestic leisure bookings and occasional days of positive sales, net of refunds, Chief Financial Officer Paul Jacobson said. But he cautioned that reservations still must translate into actual travel. Leisure traffic, such as the beach destinations Delta is booking, typically is less solid and less profitable than business travel.
“We’re cautious. We really can’t afford to have false starts,” he said at a Wolfe Research conference. “That’s going to be a challenge for the industry: How we restart in the face of demand that’s going to bounce around a little bit.”
The airline expects to reduce its cash burn to $40 million a day as June winds down and is on track to reach zero by year-end, Jacobson said.
Delta said May 18 it would restart a variety of flights in June, including on such routes as New York to Paris and Atlanta to Cancun, providing a hint that demand is poised to inch up.
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