Spike in coronavirus cases reveal signs of stalling U.S. air travel recovery

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• U.S. airline capacity is increasing in July by 55% from May lows, while daily COVID-19 infection rate has increased 130%.
• Travel sentiment model shows first signs of a slowing recovery, suggesting a plateau in daily passengers near 50% of 2019 numbers.
• Increasing capacity on path to collide with a slowing recovery, requiring airlines speculating with large schedule additions to consider cancellations or increased cash burn.

The first signs of a slowing recovery in air traffic are beginning to show in the United States just as airlines make their largest capacity increases. Even as screened passenger numbers from the Transportation Security Administration continue their upward trajectory, so do new cases of COVID-19 in states not first hit by the virus. With that growing uncertainty, the spread is showing its first indications of a slowing recovery in the months ahead.

Since the summer schedules were published, average daily new infections have more than doubled in the U.S. This, along with the plateaued sentiment numbers, suggest the airlines could find themselves in an extreme over-capacity situation, likely managed by once again cancelling many flights to conserve cash in the face of further depressed demand.

Related: Surging coronavirus infection rates aren’t slowing U.S. air travel rebound, yet

Yet, the U.S. is not unique in returning capacity in the face of a resurgence in the number of infections. Over 25 countries are seeing an increase in available seats while also seeing a new increase in daily infections. Notably, many countries in Europe, including the once hotspots of Italy and Spain, are increasing air capacity into a continued reduction in daily infections. In fact, aside from Indonesia and Yemen, all countries are planning capacity growth for July.

Further, while the U.S. continues to struggle with the balance between limiting spread and returning to normal life, a divergence is beginning to emerge between the countries who have largely limited the spread, and those which have not. As infections spread around the world unevenly, almost all countries have planned large capacity increases through July. This could put some scheduled aircraft and flying returns at risk as passengers slow down their travel planning.

Related: Business travel lags leisure early in coronavirus air travel recovery

Crucially, inside the U.S., the preliminary signs observed through the updated travel sentiment model suggest passenger demand recovery has temporarily stalled, at least for now. Originally outlined in a previous TAC Analysis in late May, the travel sentiment model works to establish trends in internet search and social media activity around travel planning activity. When compared with the drastic drop in traffic during March, the model suggests a strong correlation with travel planning and future demand.

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