Airlines begin to see drop in travel demand as virus numbers rise

A surge in coronavirus caseloads across the nation is starting to dampen the enthusiasm of leisure travelers, with one major airline warning Wednesday that the more contagious delta variant could darken the outlook through fall.

Southwest Airlines, the nation’s fourth-largest domestic carrier, said it is seeing weaker bookings this month amid a jump in coronavirus infections. The airline said if caseloads remain elevated, that downward demand trend is likely to extend into September.

The report comes after Southwest and several other carriers earlier this summer reported strong passenger numbers and fares above July 2019 levels.

In a filing Wednesday with the Securities and Exchange Commission, Southwest said “the company has recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant.”

The announcement is an alarm bell about the variant’s spread for an industry that only last month was expressing confidence that air travel demand would continue to grow. Many airlines in recent weeks have announced hiring plans to capitalize on travel approaching pre-pandemic levels.

Until this month, airline executives had said there were no significant indications that the delta variant was depressing demand for travel. Delta Air Lines, United Airlines and American Airlines declined to provide information Wednesday about the variant’s impact on recent bookings and cancellations.

Southwest is the second airline to warn recently that the highly contagious delta variant is taking a hit on air travel. Frontier Airlines last week said it was seeing a decline in bookings.

“The impact of the Delta variant on bookings, and the duration of that impact, are difficult to predict,” Frontier said in a quarterly report, saying it expects, at best, to break even in the third quarter because of the variant.

A rise in vaccination rates and a dwindling number of infections earlier this year drove millions of Americans back into the skies this summer – with most of the recovery fueled by leisure travelers. Industry data shows ticket sales have plateaued in recent weeks.

Industry experts say it is not surprising that possible travelers would be more hesitant to fly amid a new surge in cases, particularly in light of recent data that the variant can be easily passed among the vaccinated.

Cancellations could also be driven by travelers postponing trips to popular destinations, such as Florida, that have become hot spots, as well as to places that are reimposing restrictions. Hawaii, which was one of the most popular destinations this summer, recently announced it will limit social gatherings and reduce indoor capacity for bars, restaurants and social establishments to 50%.

“All these things conspire to create cancellations among leisure travelers,” said Bob Mann, an industry analyst with R.W. Mann & Co., an aviation consulting firm.

The variant-fueled outbreak also is likely to hinder business travel as more employers bring back workers this fall. Airline executives had reported an earlier-than-expected return of business travel this summer.

According to Airlines for America, the industry’s largest trade group, U.S. passenger volume is 17% below pre-pandemic levels. More people are traveling now than in the spring, but numbers still lag and ticket sales are little changed in recent weeks, according to data from the group.

“This is an extremely fluid situation, and we continue to closely monitor the impact on the state of the industry,” said Airlines for America Spokeswoman Katherine Estep.

She said U.S. airlines have leaned on science and research to prioritize the safety of travelers and employees, abiding by Centers for Disease Control and Prevention guidelines and “multiple layers of measures, including face covering requirements, pre-departure health-acknowledgement forms, enhanced disinfection protocols and hospital-grade ventilation systems.”

After seeing a growing number of people returning to the skies in recent months, Transportation Security Administration officials on Tuesday screened just more than 1.7 million passengers at U.S. airport security checkpoints, the lowest number since June 15.

Southwest blamed the downturn on the delta variant, saying that even though the company announced a profit in July, it would be difficult to reach profitability in the third quarter considering the “recent negative effects of the pandemic on August and September revenue trends.” Travel demand for the Labor Day holiday weekend remains healthy, the company reported.

Airline executives last month said they had not yet seen adverse effects from the rapidly spreading variant—a swift change in sentiment for the industry.

“What’s happened in the intervening three or four weeks is just a drumbeat of worse and worse information,” Mann said. “Even to the point that a number of carriers who previously hadn’t even weighed in on the topic have said ‘We’re going to mandate our employees be vaccinated’ because they’re just simply worried about their ability to conduct business.”

United Airlines last week said it will require employees to be vaccinated against the coronavirus, becoming the first domestic airline to mandate the vaccine as a condition of employment. Frontier Airlines said it established a policy for employees to be fully vaccinated by Oct. 1 or submit to regular testing and Alaska Airlines said it is requiring employees to tell the company whether they have been vaccinated.

Speaking about the delta variant Monday on “NBC Nightly News,” United Chief Executive Scott Kirby acknowledged the industry would see impacts.

“Certainly over the medium- to the long-term, there will be some ups and downs,” he said. “But I think that air travel is going to continue to recover. The silver lining of what has happened with the delta variant is it’s driving much higher vaccination rates across the country. And at the end of the day, that’s the only thing that’s going to really get us out of this crisis.”