Over the last week, the AirInsight US Airline Performance Index has taken a downturn, with each of the seven days lower than the prior week. This has broken a trend of slow upward growth in the index over the last four months. Are we headed for continued performance degradation as the normally busy holiday season approaches?
The following graph shows our index since March. The downturn over the first week in November is now noticeable, with a downward rather than upward slope. The inflection from slow growth to slow decline is worrisome and could be a sign of an exceptionally difficult fourth and first quarter for the airline sector. Holiday travel remains questionable for many as a “second wave” for the virus is featured by the news media.
Traffic growth has slowed over the last week but is showing signs of continued slow recovery. We have seen several periods in which a short duration blip occurs – one in early July and one in early September that have been positive and settled back to slow growth. Early November’s data shows the opposite direction, but again the possibility of a short-term perturbation. Traffic remains 60% lower than the year before.
Airline flight schedules have continued to outpace traffic levels and remain 30% lower than last year’s levels. But with traffic down twice as much as flights, even with airlines moving to smaller airplanes, the growth rates don’t show profitability for airlines until late 2022 or early 2023 if the trend lines are extended. A major breakthrough in the pandemic will be needed to reverse the trend. The positive vaccine news this morning is a welcome sign, but it is premature to take that single point of light as the end of the tunnel.
Passengers per flight have grown quite slowly but have now shown a slight downturn in early November with the downturn in traffic. We expect this metric to remain weak until confidence in flying and traffic increases. Several carriers are continuing to block middle seats as demand remains weak.
The trend in early November is in the wrong direction, but hopefully will be short-lived. We update our index daily and present it in our Morning Call posts Monday through Friday as an early indicator of industry trends. We will be watching the changing trend, and hope you will join us each morning.