Purchase and download a copy of this article
- U.S. airlines are chasing each other with each move to add back capacity, forcing decisions that are cascading the industry toward overcapacity and increased cash burn.
- Even with overcapacity at risk, airlines are left with no choice but to respond move-for-move or face losing customers to competing airlines.
- Southwest and Delta have been able to leverage their strong balance sheet to either force the defensive moves, or avoid the jockeying for position altogether.
In the middle of the single most acute crisis to hit the airline business in the history of flying, U.S. airlines are seemingly trapped playing a cascading series of one-upmanship games as they chase market share, risking further destabilizing their airlines at a time when the industry’s very survival hangs in the balance.
Airlines are announcing new air capacity, undeterred as the number of weekly COVID-19 cases rise in the United States at record rates. Rebounding from a low in May, all U.S. domestic carriers are now forecasting an almost three-fold increase in flights for August.
Related: Spike in coronavirus cases reveal signs of stalling U.S. air travel recovery
This additional capacity comes as the recent lull in passenger planning and sentiment published by TAC Analysis illustrating a coming decline in passenger demand. Confirmed by a warning from United Airlines on slower bookings, the reintroduction of capacity into the U.S. domestic market still continues at a rapid pace. The increases exceed the demand recovery trend shown by the Transportation Security Administration’s passenger screening numbers.
This new capacity has been celebrated as a sign of recovery, however the divergence between capacity additions and returning demand raises real concerns of overcapacity. Without demand to fill seats, additional flights represent increased cash burn; the very lifeblood of the airlines in this crisis. Yet, capacity continues to return.
Rather than take the capacity additions at face value, this TAC Analysis evaluates the decisions behind the new flights, and how a new type of competitive jockeying is likely driving the race to add capacity. Beyond the seemingly reckless increase in flights and added operational spending, we look at how the airlines are left with no choice but to join in the capacity growth, or risk losing valuable market share that could leave them marginalized in the new marketplace.Continue Reading...
Spike in coronavirus cases reveal signs of stalling U.S. air travel recovery
In the middle of the single most acute crisis to hit the airline business in the...