Skip to main content

The resurgence of leisure travel has been a significant tailwind for the airline industry’s rebound. Strengthening demand forecasts helped the industry deliver improved financial results in the second quarter. Yet, one of the most profitable segment for airlines, business travel, still faces uncertain prospects for a full recovery.

Additional supply chain disruptions continue to create re-opening turbulence. Several airports recently announced jet fuel shortages, compounding a nationwide labor shortage that has affected airlines’ ability to hire enough qualified pilots. The rise of the COVID-19 delta variant has caused overall case numbers to jump, clouding the developing outlook of the aviation industry’s recovery.

Related ETF & Stocks: U.S. Global Jets ETF (JETS), American Airlines Group Inc (AAL), United Airlines Holdings Inc (UAL), Delta Air Lines, Inc. (DAL)

Airlines Post Strong Earnings, Business Travel Recovery Up in the Air

Airlines reported impressive Q2 results across the board, boosted by strong travel numbers over the holiday weekend in early July.

United Airlines shares rose through the last two weeks of the month, despite reporting a sixth straight quarter of losses. As CNBC notes, losses continue to narrow as bookings surge. The carrier posted higher than expected revenue, stating domestic leisure travel led the way while business and international travel bounced back faster than expected in the second quarter.

United CEO Scott Kirby did note that the delta variant could create “pullback” on the economic reopening, but that it would be a temporary setback. The company still forecasts a full recovery by 2023.

Similarly, as Barron’s reports, Delta Air Lines earnings largely beat Wall Street forecasts in their earnings report delivered earlier in July. Management sounded upbeat about business and international travel recovery, two key segments for Delta to return to profitability.

Following Delta’s earnings announcement, American Airlines followed suit, expecting domestic business travel to recover to fully recover by 2022, per Investor’s Business Daily. However, the company did note that international business travel, a highly profitable segment, is still a long ways off from a similar rebound.

It’s clear business travel will be key for airlines to fully recover from their pandemic lows, and there is a wide variety of opinions on when that recovery will finally occur.

Most airlines reporting earnings claimed to see their business travel numbers pick up in recent weeks, yet those numbers are still down by more than half when looking at this month two years prior, per USA Today.

Delta reported business travel to be 40% of typical levels and predicts it will hit 60% in September. The company does believe, however, that it is a strong possibility 10-20% of business travel will be fully eliminated.

Additionally, USA Today highlighted a report from the US Travel Association that estimated domestic and international business travelers spent $300 billion here in 2019. The association believes that number fell to $95 billion in 2020, and that it will not fully rebound to 2019 levels until 2024.

Airlines were anticipating heighted business travel demand in the fall, as companies re-open and workers continue to return to the office, but it appears delta variant fears could pause those plans as the US refuses to remove any international travel restriction.

On a more bullish note, Forbes reported positive news for the airlines after publishing a survey of 900 Americans regarding business travel. The survey found…

To read the complete Market Insight, current clients SIGN IN HERE

For a free trial, or to subscribe and become an MRP client today, START A FREE TRIAL

Once you’re logged in, you’ll also gain access to:

  • Our Daily Investment Insights
  • Joe Mac’s Market Viewpoints
  • All of MRP’s Active Thematic Investment Reports
  • MRP’s Entire Research Library