Planes Are Still Flying, but Covid-19 Recovery Will Be Tough

Airlines’ ability to serve cities depends on pre-pandemic flight frequency, with many routes requiring at least three weekly flights. Delta continues service to Alpena, Michigan, American operates five weekly flights to Roswell, New Mexico, and United runs three weekly flights to Dodge City, Kansas. The Department of Transportation aims to prevent small cities from being removed from the national air network during crises, resulting in a national average of about one passenger per 20 seats. Low load factors make profitability difficult, since flights typically need at least 85% seat fill. Recovery expectations differ, with some projecting faster rebounds and others expecting slower travel demand. Cost cutting includes retiring older aircraft, with industry-wide plans to remove hundreds of jets for conversion, parts, or storage.

"Depending on how often they flew to a given city before the pandemic hit, airlines can fly to each city as little as once a week, but in most cases the rules will require them to drop in at least three times a week. That's why Delta is still sending planes to Alpena, Michigan; American is serving five weekly flights to Roswell, New Mexico; and United is operating three weekly flights for those who'd like to get into or out of Dodge City, Kansas."

"For the Department of Transportation, it's important that small cities not be cut out of the national air network, even in, or especially in, a time of crisis. The result, according to the Cowen analysts, is a national average of roughly one passenger for every 20 seats. "That's making airlines burn cash they'll need when the economy turns around later this year," says Mike Boyd, who runs the aviation consulting firm Boyd Group International."

"Making a profit on a flight requires filling at least 85 percent of seats, he says. "They really shouldn't be flying anywhere near what they're flying today." Boyd is optimistic about a flying comeback, estimating that passenger numbers could return to 80 percent of 2019 levels by the end of this year. The Cowen analysts are less sanguine, anticipating a recovery slower than those that followed the September 11, 2001, terrorist attacks and the 2008 financial crisis."

"Staying alive long enough to see who's right, though, will take serious sacrifice. Pushing down costs starts with selling off planes, especially old ones. American is retiring all of its 757, 767, and E190 jets, along with some of its older 737s and A330s. Cowen expects its rivals to make similar moves, collectively ditching 800 to 1,000 jets, which may be converted to freighters, scavenged for parts, or left to bake in a desert graveyard."

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