Airlines Predict A Long Slow Recovery Even As Tourism Returns
Airline executives say they see much smaller operations well into next summer.
As Hawaii reopens to tourists with a plan that lets travelers sidestep the state鈥檚 14-day quarantine for arrivals, few companies stand to gain more than Hawaiian Airlines. Then again, few have lost more because of the shutdown.
With Hawaii鈥檚 tourism industry largely shuttered since March, the state鈥檚 dominant carrier has mostly grounded its fleet rather than flying empty airplanes across the Pacific Ocean. But that hasn鈥檛 kept the airline from bleeding millions of dollars and shedding thousands of employees.
The question is when will travel to Hawaii and elsewhere bounce back enough to help Hawaiian and other airlines rebound to where they were before the crisis? The answer: nobody knows for sure, but it鈥檚 not likely to be soon.
鈥淭his is clearly a crisis without precedent in the airline industry,鈥 Avi Mannis, Hawaiian鈥檚 senior vice president of marketing, said this week during an online hosted by the University of Hawaii Manoa Shidler College of Business.
As a whole, domestic air traffic in the U.S. is down 70% compared with the same time last year, Mannis said, and about one third of the U.S. commercial airline fleet is grounded.
The last 鈥渆ven remotely comparable crisis,鈥 Mannis said, was the terrorist attacks of Sept. 11, 2001. But the impact from COVID-19 is proving more significant and the recovery slower. For example, Mannis said, four months after 9/11, passenger traffic was down about 15%. Four months into the COVID-19 crisis, he said, passenger traffic was down 80%.
As bad as COVID-19 has been for U.S. aviation in general, it鈥檚 been especially bad for Hawaiian. Gov. David Ige鈥檚 14-day quarantine order, which he issued in March, caused Hawaiian鈥檚 demand to drop by 97% to 98%, Mannis said.
Meanwhile, the company has been spending about $3 million a day to cover fixed costs, he said. With little revenue coming in from operations, Hawaiian has had to borrow hundreds of millions of dollars to cover the expenses, Mannis said.
That鈥檚 on top of the $290 million it received to pay employees under the CARES Act鈥檚 $25 billion Payroll Support Program for airlines. The problem is, like with much of the CARES Act money for small businesses and individuals, that $290 million has run out. As a result, Hawaiian earlier this month was forced to cut some 2,500 employees, about a third of its work force, including many who took early retirement.
Dearth Of Data Makes Forecasting Impossible
When all of this might turn around is unclear, even for the airlines, which are known for their ability to use data and forecasting to plan how to deploy their enormously expensive airplanes and armies of crew needed to staff them.
鈥淚t is very difficult for us right now to put forward a definitive forecast,鈥 Mannis said. 鈥淲e鈥檝e stopped using that word internally, and we talk a lot about planning assumptions.鈥
One planning assumption, Mannis said, envisions the airline鈥檚 capacity to be 15% to 25% smaller come next summer.
During the panel discussion, Daniel Chun, Alaska Airlines鈥 director of sales, community and public relations for Hawaii, said Alaska shares the view, assuming capacity could be 20% smaller by next summer.
Hiroshi Shibata, vice president and general manager for All Nippon Airways鈥 Honolulu office, said the Japanese aviation industry envisions it will take two years to recover.
It鈥檚 not surprising that the airlines are having trouble predicting a recovery, said Carl Bonham, executive director of the University of Hawaii Economic Research Organization who also forecasts state tax revenues for policymakers as an economist with the .
There鈥檚 been so little air travel to and from Hawaii for so long that the carriers don’t have a lot to go on, he said.
鈥淚t鈥檚 not surprising that the airlines wouldn鈥檛 have a lot of data to plug into their forecasting models,鈥 he said.
Even Thursday鈥檚 restart is more like a 鈥渟oft opening,鈥 Bonham said, as possible bugs get worked out and word gets out to potential travelers about Hawaii鈥檚 pre-travel testing program.
Further confounding the ability to predict the future is that there are many unknowns beyond anyone鈥檚 control, like whether there鈥檚 a spike in cases from residents or travelers, that put the reopening at risk.
In a few weeks, a picture could start to get clearer, Bonham said.
鈥淏y this time in November we could have quite a bit more information,鈥 he said. 鈥淏ut that information can change at the drop of a hat.鈥
鈥Hawaii鈥檚 Changing Economy鈥 series is supported by a grant from the as part of its CHANGE Framework project.
