US airlines may have already seen worst of Delta variant impact

Several major US airlines have reported worse-than-expected August performance amid the surge in Covid-19 cases caused by the Delta variant across the country. But the bite of the latest surge may prove short-lived as case numbers in early hotspots have already peaked and Americans try to cram in one last summer trip this September. “While the Delta-variant has caused August to underperform expectations and the anticipated step function improvement in business travel likely to be delayed, encouragingly, the demand impact has not been as big as prior Covid waves,” wrote Raymond James Analyst Savanthi Syth in a report on August 29. Citing restaurant data, Syth noted that where the surge has peaked consumers are “quickly returning to ‘normal,'” where normal is pre-surge levels. And, in a report on August 26 citing similar Covid-19 case trends, Cowen Analyst Helane Becker said the trend “could drive a demand rebound as travelers look to squeeze in a vacation before the end of summer.” A last-minute bump in September leisure travel could be one reason why American Airlines declined to revise its guidance for the rest of the year after missing revenue its forecast in August. Speaking on August 25, American Chief Revenue Officer Vasu Raja reiterated that the recovery is and will be “very choppy” but added that, despite the slowdown, “there will still be a recovery.” This is not to say airlines will avoid a fall slowdown. Historically, capacity decreases after Labor Day as leisure demand drops with kids returning to school. Business travel typically picks up some of that slack but not enough to avoid schedule reductions; however, it is unclear when this will occur due to later-than-expected return to office plans at many large companies. <br/>