Domestic Airlines Struggle as Consumers Embrace Global Travel

This summer has brought a travel boom. Just not in the way airlines might have expected.

As Bloomberg News reported Thursday (Aug. 3), travelers seem to want to take international trips, which has left domestic airlines slashing prices and feeling strained, with JetBlue lowering its outlook for the year, and carriers like Southwest indicating they’re feeling pressure.

“If you don’t cater to premium, if you can’t bank on loyalty and if you don’t fly internationally, this year’s third quarter is likely to disappoint,” said Jamie Baker, a JPMorgan Chase analyst.

According to Bloomberg, the desire to travel overseas — following the relaxation of COVID restrictions — has been more than the airline industry anticipated. It’s left U.S. round-trip rates down around 11% compared to last year, with that figure expected to stay below 2019 levels until the winter holidays.

Even then, the report said, the industry executives aren’t quite ready to say sales will tick back up after the summer travel season.

“We actually believe a lot of the demand is going to spill into the fall, and therefore, we have not made an assumption that this environment changes before we get into the heart of winter,” Frontier Airlines Chief Executive Officer Barry Biffle said.

“Although I do know that once we get to January, February, it’s a heck of a lot better to be in Florida than it is in most parts of Europe.”

While the rise of international travel is hurting domestic airlines, the trend has been good for hotel chains such as Marriott, which earlier this week reported a sharp uptick in RevPAR (revenue per available room), a trend the company to continued recovery in global leisure and business travel, particularly from key markets such as China.

“With continued momentum in demand for global travel, we posted another quarter of outstanding results,” Marriott President and CEO Anthony Capuano said in the press release. “Greater China rebounded quickly once travel restrictions were lifted in January, with second-quarter RevPAR surpassing pre-pandemic levels.”

PYMNTS research has found a not-inconsiderable number of consumers who say they’re not willing to give up on travel even in the face of high inflation.

“Getting away from it all has been one of the last discretionary items consumers are forgoing in their ongoing battle to combat inflation,” PYMNTS wrote earlier this year. “This reluctance highlights the importance of travel on the consumer mindset, as travel is typically a huge expense no matter the general economic landscape.”