Airplanes have a primary function: the ability to go up and down. So it is with the outlook for air travel in 2022 —one week it’s grounded, the next aloft again.
Confronted with rising fuel costs that are making plane tickets too pricey for many consumers fresh from a pandemic and dealing with its economic fallout, airlines experienced an unsettled start in 2022.
But a wave of upbeat guidance and accompanying comments now has market watchers upgrading gloomy predictions from recent months to show a sector in motion.
On Tuesday (March 15) The Wall Street Journal reported, “After the wave of Omicron variant-driven Covid-19 infections slowed travel bookings at the start of 2022, airline executives said demand has roared back more quickly than they anticipated. As a result, carriers expect to be able to absorb higher jet fuel costs by paring back flying capacity and passing the costs along to customers.”
It’s that last bit about “passing the costs along to customers” that will get tricky this year as consumers view 2022 with a mix of optimism and doubt.
“Tammy Romo, chief financial officer at Southwest Airlines, told an investor conference that the pricing environment has been healthy,” Reuters reported Tuesday (March 15). The Texas-based carrier has raised its fares. Similarly, American Airlines said the improvement in revenue is expected to more than offset the increases in fuel and other expenses in the current quarter.”
Air travelers in 2022 have a new affordability ally in the form of buy now, pay later (BNPL) plans and partnerships flowing into the sector since last year, and ramping up in recent months.
See also: Flying the Friendly Skies One Installment Payment at a Time
Cleared for Takeoff
If this is a rally, it actually began over President’s Day weekend in February when CNBC reported that the “Transportation Security Administration screened nearly 8.4 million people … more than double the number from a year ago but down 7.5% from the 9 million people the TSA screened in 2020, a month before Covid-19 was declared a pandemic.”
See also: Travel and Hospitality BNPL Options Expand as Sector Faces New Enemy — Inflation
Fast forward a month and airlines dominated headlines Tuesday (March 15), with Barron’s reporting that “Delta Air Lines said it now expects revenue in the March quarter to recover to 78% of 2019 levels, up from a previous guidance of between 72% and 76% issued in January. It also expects total revenue per available seat mile to be flat versus March 2019, in a guidance update ahead of the JPMorgan industrials conference in New York.”
“United Airlines also provided a guidance update ahead of the conference, now seeing its revenue in the first quarter of 2022 ‘near the better end’ of its range of 20% to 25% lower than the first quarter of 2019 levels,” that story added.
Speaking at an investor conference in London, Reuters reported that Delta CEO Ed Bastian said “Delta had enjoyed the busiest booking day in its history last week, even though many Asian routes remained suspended.” Bastian said he was seeing the strongest demand in his career.
With the buoyant news comes the fact that airlines are not only making up for higher fuel prices with costlier tickets, but many are also reducing capacity in 2022. Several major carriers, including American Airlines, are trimming flights in 2022 due to uncertainties in the sector.
See also: Further Fuel Price Hikes Could Stall Travel Sector’s Recovery
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