Airlines could use the coronavirus crisis to jack up prices for good - New York Post

It’s not a great time to be in the airline business. On Wednesday, President Trump banned European air travel from 26 countries to stop the spread of the coronavirus, leading to an even greater drop in flight demand. Amid a tanking stock market, the nine-member S&P Airlines Industry Index fell faster this week than at any period in recorded history. American Airlines shares have shed over half their value in three weeks. Southwest CEO Gary Kelly compared the financial crisis to the period following the Sept. 11 attacks.

For travelers willing and able to get onboard now, airfare is shockingly low. Flights on premium New York to Los Angeles routes can be found for $142 round-trip, down from a seasonal average of more than $300. A one-way trip on a United Airlines flight from New Orleans to New York City this week cost just $49 — about as much as a Greyhound bus fare.

For now, the coronavirus is bringing the travel industry to a standstill, but the current state of panic won’t last forever. And when flyers do return to the skies, they will be greeted by a lot fewer seats and, as a result, much higher airfares than ever before.

On Tuesday, Delta released specific reduction figures for domestic and transoceanic markets, effectively telling their competitors exactly how many seats will be on the market in the coming months.AP

Normally when airlines appear to club together to control the number of seats available to customers, they become the subject of antitrust action or at very least intense scrutiny. In 2015, the Justice Department launched an investigation into the big three US airlines — American, Delta and United — over mere mentions of “capacity discipline” in earnings reports and other public communications.

But, on Tuesday, Delta Air Lines published a press release that gave specific reduction figures for domestic and transoceanic markets, effectively telling their competitors exactly how many seats will be on the market in the coming months. That degree of explicit communication is unheard of in normal times, but, in the context of staving off a coronavirus apocalypse, these reports don’t seem to be raising any eyebrows.

Robert IsomAP

Meanwhile, at an industry conference Tuesday, American Airlines President Robert Isom discussed accelerating plans to retire aircraft amid the slowdown. Every jet the airlines scrap amounts to another 180, 200 or 250 seats that won’t be on the market when conferences and business meetings are eventually rescheduled.

At the same time, major airlines are canceling and postponing new aircraft orders at a quickening pace. Boeing has lost a total of 29 net orders so far this year. Its competitor, Airbus, failed to secure a single new aircraft order in all of February.

Now regional airlines and discount carriers are at risk of collapse. Last week Flybe, Europe’s largest regional airline, went bust. Executives cited COVID-19 as the final nail in the struggling airline’s attempts to become profitable. And low-cost carrier Norwegian Air, which has grappled with financial struggles for much of the past two years, announced Thursday that it will lay off half its entire workforce as transatlantic flights halt.

The major US airlines — American, Delta, Southwest, United — will be able to weather the crisis, because they have stockpiled immense cash reserves amid a historic boom in air travel. But as smaller airlines make drastic cuts and potentially disappear altogether, seat capacity will drop even further.

A one-way trip on a United Airlines flight from New Orleans to NYC recently cost just $49 — about the same as a Greyhound bus fare.

In a few months, events will resume. Cabin-feverish travelers will bolt. Businesspeople will rush to catch up on lost meetings and delayed opportunities. When they do, leaner airlines will be poised to charge a pretty penny for the fewer remaining airplane seats on the market.

For now, travelers would be wise to take advantage of airlines’ unprecedentedly generous change-fee waivers and buy up whatever tickets they can justify at Greyhound-cheap prices.

John Harper is an executive travel consultant and editor at travel and aviation blog Point Me To The Plane.

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Airlines could use the coronavirus crisis to jack up prices for good - New York Post
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