Business, International Recoveries Will Shape U.S. Airline Networks

Newark Liberty International Airport
Credit: Gary Hershorn/Getty Images

WASHINGTON—U.S. airlines are benefiting from strong leisure demand during the traditionally busy peak summer season, but for many the final steps to a sustained recovery—business and international traffic upticks—could be difficult. 

That is the conclusion from a new Swelbar-Zhong Consultancy analysis that projects 87% of the gap between projected 2021 U.S. carrier passenger totals and 2019’s figure is lost business and international traffic. 

The analysis projects that U.S airlines will carry 62% of their 2019 passenger totals in 2021. Within that percentage is 90% of 2019’s leisure traffic, and 20% of business traffic. Getting the rest of it back—particularly the international component that contributes to both business and leisure—will not happen overnight, the firm says.  

“Meaningful business traffic recovery is expected to commence in 2022 when conferences, conventions, and face-to-face visits can be planned without concerns,” the analysis says. “International travel is governed by so many entities it is hard to see any sort of a recovery until the summer of 2022. However, it will be less than a full recovery.” 

The steep climb that remains to reach pre-downturn demand will be hardest on full-service carriers, for obvious reasons—their exposure to business and transborder traffic is higher than that of, say, Southwest Airlines. The Dallas-based carrier’s percentage of international passengers was about 2% heading into the downturn. The so-called U.S. Big Three, on the other hand, counted on International traffic of between 14-19% of their passengers. United Airlines topped the list at 19%, followed by American Airlines at 16% and Delta Air Lines at 14%. 

Among the potential ramifications will be changes to how airlines rebuild their networks. Carriers such as Southwest and Alaska Airlines, which carried 95% domestic passengers, rely far less on international feed to make routes work. But for hub-and-spoke carriers, this feed is integral to building and sustaining a broad, profitable network. 

“From a revenue perspective, the inability to offer service at any meaningful level to Europe, Asia, and Oceania for the Big Three is not only a negative in terms of international service, but stands in the way of building respective domestic networks at hubs and gateways,” the analysis says. “If there is no international service to feed traffic to, then historic domestic traffic carried would not be sufficient to offer the same level of service offered in 2019.” 

For airports of all sizes, recovery of both domestic business and all forms of international traffic is equally important.  

The percentage and pace of domestic business-travel recovery will help determine which spokes return in legacy carriers’ hub-and-spoke networks. Swelbar-Zhong puts the 2019 U.S. domestic leisure/business passenger split at 60%-40%. Smaller airports rely much more on business, with small hubs generating 45% of pre-downturn traffic from business travel; the non-hub figure was even higher, at 52%. 

Large hubs with significant international feed have the most to gain from a global recovery. Examples abound: Atlanta Hartsfield Jackson International’s trans-border passenger count was down 72% through the first five months of 2021 compared to 2019, while Miami International was down 60%. 

Both airports are among those benefitting from one of the few strong international markets—short-haul flights to Latin America. 

“It’s really the tale of two markets,” Delta Air Lines President Glen Hauenstein says. “One is the [combination of] close-in U.S. point of origin leisure market as well as Mexico business. Both of these are actually exceeding 2019 levels.” 

Long-haul flights to the region, like the rest of international, is struggling due to a combination of COVID-19 outbreaks and related travel restrictions. 

“We’re seeing a U.S.-based demand recovery to the open countries” in Europe, Hauenstein says, citing U.S. government restrictions on incoming passengers as a deterrent for European travelers coming west. 

“While we know international demand recovery will be very choppy and uneven, we’re seeing strong bookings to Europe when countries open their borders,” Delta CEO Ed Bastian says. 

Pacific markets will likely be “the laggard” due to lower vaccination rates and related travel restrictions, Hauenstein says. 

“We really don’t see any impetus for that to be lifted,” he adds. “I think we’re looking at a 2022 [time frame] as the earliest significant recovery in the Pacific.” 

While international demand will be largely dependent on restrictions, Delta does not see companies cutting back on travel compared to their pre-downturn patterns. A recent survey of its corporate customers found 57% anticipated returning to 2019 travel levels by 2023 at the latest. Only 5% said they do not anticipate going back to pre-pandemic travel budgets.  

The remaining 43% are not sure. How they proceed will be crucial to the recovery of U.S. full-service carriers, and Delta is confident in the outcome. 

“There’s enormous pent-up energy and demand for travel,” Bastian says. 

Sean Broderick

Senior Air Transport & Safety Editor Sean Broderick covers aviation safety, MRO, and the airline business from Aviation Week Network's Washington, D.C. office.