Air travel demand is easing as coronavirus cases spike in the southern U.S., according to data released Monday, souring airlines' hopes of a summer rebound that would help generate cash to weather the pandemic.
In the week ended July 19, 4.65 million people passed through checkpoints at U.S. airports, according to the Transportation Security Administration, down more than 4% from a week earlier and the first weekly percentage drop since April.
Air travel is up sharply from more than five-decade lows hit in April, but airlines are facing softening demand amid new cases, quarantine orders for arriving travelers in New York and elsewhere, and delays in reopening some states to stop the highly contagious virus from spreading.
The peak summer season is always crucial to airline revenue but it is even more important this year with a grim outlook for corporate travel this fall because of the pandemic.
Delta Air Lines last week said it would halve the number of additional flights planned for next month to 500 a day and CEO Ed Bastian warned that some business travel might never return after the pandemic.
"Demand has stalled as the virus has grown, particularly down here in the South, across the Sun Belt, coupled with the quarantine measures that are going in place in many of the Northern states," Bastian told CNBC's "Squawk Box" last Tuesday. "Those two factors are causing consumers to pause."
"Our passenger revenues in June, while we believe are better than others in the industry, were more than 80% lower than June 2019," American's CEO, Doug Parker, and President Robert Isom said in a memo to employees. "And with infection rates increasing and several states reestablishing quarantine restrictions, demand for air travel is slowing again."
Airline executives will provide more detail on demand trends this week. United Airlines is set to report quarterly results after the bell on Tuesday. American Airlines and Southwest Airlines are scheduled to report before the market opens on Thursday.
Airline shares were down Monday morning, with United off 3%, Southwest and American each down close to 3% and Delta dropping 2.5%.