Key Perspectives on the Near-Term Recovery of Travel and Flying from a Travel Industry Startup

 

 

Despite the recent pandemic’s undoubtedly significant challenges for the travel sector, people have been passionate travelers since we first learned to walk. The best way to put it is maybe to cite Sir Richard Burton, who said, “The gladdest moment in human life, methinks, is a journey into uncharted territories.” We can tell that certain things have changed after the pandemic, possibly permanently. The pandemic has caused us to consider our vacation plans and motivations. Future journeys, particularly long-distance ones, will likely be better planned and may even lead us to places we have never been.

 

In order to make our journeys more prepared, we will rely more on service technology and travel concierges. We got down with one of the founders of Scott’s Cheap Flights, a business that employs clever software technology to identify and offer cheap ticket information to their subscriber base, to get an extra viewpoint on the near future of travel. The following travel industry observations are based on a conversation with Scott Keyes, Co-Founder and Chief Flight Expert of Scott’s Cheap Flights, and are supported by data from Airlines.org:

 

– Although the number of passengers is still 5% lower than it was before the epidemic, since March 2022, planes have been more filled than they were in 2019. The reason is a 15% decrease in flight volume, or the actual number of flights.

 

– Leisure passengers are overrepresented in the travel rebound, giving budget carriers a home-field advantage. While American, United, and Delta, the major three full-service airlines that depend more on business and international travelers, are all down 8–12%, Spirit is flying 28% more, Allegiant 26% more, and Frontier 14% more.

 

– Passenger traffic between the United States and China, which saw millions of travelers in 2019, is currently down 98%. There won’t be a speedy recovery under China’s existing Covid strategy.

 

– Despite recent rises, the era of inexpensive flights is still in its prime. Although adjusted for inflation, prices have increased by 23% over the past year, they have decreased by 11% over the previous five years and 28% over the previous ten years. Inconceivable fares like $177 roundtrip to Hawaii and $286 roundtrip to Iceland are already commonplace on a monthly basis.

 

Scott was asked for his opinions on the following issues as we dug deeper into the recovery of the travel sector:

 

Business travel will it totally recover?

 

 

For airlines, especially full-service carriers whose business models are based on catering to business travelers and their expense accounts, this is the million-dollar question. Business travel volume has reached a stubborn barrier over the previous four months and is currently still 25% lower than it was prior to the outbreak. As more meetings go to Zoom and fewer offices reopen to hold business meetings in the first place, my educated opinion is that while we may see incremental gains, a sizable amount of business travel will never return. However, more sales and consulting work will be done remotely. Conference travel will return.

 

Will travel to Asia grow again?

 

Transpacific airfares fell as as low as $280 roundtrip in 2019 thanks to the USA-China travel market’s two decades of rapid growth. That was mostly because Chinese airlines receiving subsidies overflowed the market with flights, driving down prices across the board. However, due to China’s Covid zero policy, travel between the US and China has decreased by 98%, while flights to Asia have remained persistently expensive. It appears likely that China will drop its Covid zero policy and resume accepting tourists at some time within the next year or two. Given the drop in business travel and the reopening in Japan, Hong Kong, and Taiwan, I would anticipate a significant increase in USA-Asia travel, albeit still likely less than in 2019.

 

When will the scarcity of pilots be over?

 

Many of the present issues with air travel, including fewer flights, greater disruptions, and higher prices than in 2021, have been caused by the pilot shortage. Between 5,500 and 8,000 pilots are currently needed nationwide. Of course, being a pilot is not an entry-level position, so there is no quick fix. However, I would anticipate this to resolve itself in the next year or so due to airlines investing in flight schools and significant pay increases at regional airlines (in some cases tripling the previous income).

 

Is there a pattern or blip in the number of premium seats?

 

Airlines have been renovating their aircraft more frequently, adding larger premium sections, more business class seats, and new premium economy sections that weren’t available ten years ago. I fully anticipate that this pattern will persist. The fact that airlines have diversified their business models from ones that relied solely on economy airfare decades ago to ones that do so today with a wide range of revenue streams, from credit cards and bank contracts to corporate sales, cargo, ancillary fees, hotel commissions, and, especially, an increased reliance on selling premium seats, is one reason we’re living in the Golden Age of Cheap Flights. Only 9% of Delta’s seats were premium in 2011, but that number rose to 24% by 2019. Additionally, just 13% of first-class seats were actually sold in 2011; by 2019, that number had increased to 60%. In 2022, those numbers had only increased. Airlines are placing greater emphasis on premium, which is effectively further subsidizing economy rates.

 

Source: Forbes