We have reached a fascinating pivot point for the airline industry as airlines struggle to generate profits as the pandemic continues. The latest development has most major airlines ordering their employees to be vaccinated against COVID-19 to keep their jobs.
The backdrop to the move was the expected drop in future travelers caused by growing concern about the delta variant. The daily number of passengers filtered by the Transportation Security Administration (TSA) shows that only 60 percent to 70 percent of travelers have returned to the sky. The rate of future reservations is decreasing and the number of canceled future reservations is increasing, raising concerns in the airline industry.
Add to that a drop in the number of business travelers, and the tone gets even more serious. Airlines generate 70 percent of their income business travelers, and fewer flights than before the pandemic. With more and more companies allowing remote working for employees, the need for face-to-face meetings has diminished. The sharp drop in revenues has forced airlines to cut valuable business class / first class seats and replace them with economy plus seats.
Since most of the demand comes from leisure travelers, airlines are seeing more demand for larger economy seats, which can be sold 33% more per square foot than basic economy seats. As such, airlines are trying to capitalize on the demand for travel.
As if that weren’t enough, airlines are also facing a historic decline in the number of employees they can hire. Never before have airlines seen a time when so few apply for a job. Things are so bad that a recent American Airlines flight arrived at its destination and passengers were unable to disembark – because no American Airlines employee were on duty at the time.
With that in mind, airlines are demanding that their employees be vaccinated against COVID. From United Airlines in early August, other airlines followed suit, telling their employees they needed to get vaccinated to keep their jobs; most employees comply.
Interestingly, smaller regional carriers have yet to follow suit, in part because they have more difficulty finding and retaining employees than larger traditional carriers. Many regional carriers fear that such a requirement will further reduce the number of potential employees.
Airlines are clearly positioning themselves for the expected upcoming announcement from the Biden administration that proof of COVID vaccination is required for domestic travel within the United States, or a negative test result within 72 hours of departure. This was the United States international travel policy since the beginning of this year.
In February, the Biden administration nearly ordered proof of a negative COVID test for domestic travel, but the airline industry retreated. As the summer travel season approached and the number of early bookings approached, there were concerns that such a move could put a damper on some of the future travel numbers at a time when airlines were desperate for revenue of any kind. that is. But that position has clearly changed. Airline CEOs publicly state that they will be ready if such a mandate is imposed.
So why have airlines changed their stance on vaccination mandates? As always, it’s about income and a desperate hope that the next leg will bring back more passengers. Airlines are losing money. They can only increase leisure rates to a certain extent; even still, it will not fill the void left by the absence of business travelers. The hope is that if a vaccine travel warrant is put in place for domestic travel, the number of people heading to airports will increase.
But will he do it?
This latest move could backfire on the industry, flying fewer people, but airlines are ready to take the chance because so far nothing else has worked. The return or profit per ticket from leisure travel is surprisingly low, in some cases less than $ 20 per ticket each way, so airlines scramble to find ways to increase their revenue stream. This latter approach may succeed or backfire – only time will tell.
The only thing we are sure of is that the airline industry as we know it is constantly evolving. And there’s a good chance that when the music stops, we’ll see fewer airlines out there.
Jay Ratliff has spent over 20 years at the helm of Northwest / Republic Airlines, most notably as General Manager of Aviation. He is an IHeart aeronautical analyst.