Business Travel Briefing
For July 15-July 29, 2021
The briefing in brief: Delta turns second-quarter profit thanks to the taxpayer bailout. Yes, the first few weeks of July have been rotten for flying. The DOT wants airlines to refund optional fees for services they don't deliver. The Supreme Court turns away a challenge to the in-flight mask mandate. New York City faces a hotel glut. Gogo is gone. And more, including the daily Coronavirus update.
DELTA AIR LINES IS CANARY IN THE EARNINGS COAL MINE
Delta Air Lines reported second-quarter earnings yesterday (July 14), the first carrier to open its 2Q books. Guess what? Taxpayers are literally underwriting Delta's profit. Thanks to $1.5 billion in pandemic relief, Delta registered a $652 million profit instead of an adjusted loss of $678 million. Chief executive Edward Bastian predicted a profitable third and fourth quarter even though he says 3Q revenue would still be down 30-35% compared to 2019 levels. Other nuggets from the earnings report and subsequent analyst call:
95% of corporate accounts
booked business travel in the month of June, said president Glen Hauenstein. But the airline's largest corporate accounts don't expect substantial return of business travel until next year and about a quarter of them don't expect to return to 100% of 2019 levels until 2023.
remains down 35% compared to 2019.
Credit card spend
on Delta's co-branded American Express cards is now 115% of 2019 levels. Given the weakness of Delta Sky Miles, it certainly shows that far too many Delta customers are sheep waiting to be financially sheared.
The vaccination rate
among Delta employees is now 72%.
DOT WANTS AIRLINES TO REFUND FEES GONE WRONG
The Department of Transportation has proposed a new regulation that requires airlines to refund optional fees when they don't provide the promised service. Kooky, eh? The measure would require airlines to refund things such as seat-selection fees or WiFi charges if the services aren't delivered. It would also require airlines to refund checked-bag fees if the luggage is lost or significantly delayed. "Consumers deserve to receive the services they pay for or to get their money back when they don't," explained Transportation Secretary Pete Buttigieg. The proposed regulation--read it here
in all its bureaucratically dense language--goes through a comment period before the DOT adopts it. The regulation was unveiled as part of President Biden's executive order about increased competition in many parts of the American economy.
IN-FLIGHT MASK MANDATE SURVIVES ANOTHER CHALLENGE
As I explained earlier this month
, political realities would ensure that the in-flight mask mandate would survive at least until its scheduled expiration date of September 13. Even extremely conservative Supreme Court justices are reluctant to wade in. On Tuesday (July 13), Justice Clarence Thomas swatted away a request for an emergency injunction against the mask mandate. The request was made by a flyer, Lucas Wall, who was booted from Orlando Airport last month for refusing to wear a mask. He appealed to Thomas for relief, claiming he had to fly to Germany on Saturday (July 17) and would be irreparably harmed by the "improper, illegal and unconstitutional" mandate. Thomas didn't rule on the merits of Wall's claim, simply referred it back to a trial court in Orlando, where Wall's suit awaits a hearing. Meanwhile, Senator Rand Paul (R-Kentucky) yesterday (July 14) introduced a bill to "stop the nanny state mandate." He has four co-sponsors, all Republicans. In the House, Andy Biggs (R-Arizona) introduced a companion bill. Chances of either being discussed before September 13? Nil.
A ROTTEN FEW WEEKS TO FLY
I said last month
that a return to "normal" on the road would mean things would go back to being rotten. And, boy, life on the road in the last two weeks has been just awful. Thanks to short staffs, a surge of inexperienced leisure travelers and some awful weather in parts of the country, several carriers were thisclose to meltdown over the extended July 4th weekend. The tracking service FlightAware
says that JetBlue Airways ran just 49% on-time from July 1-6. Southwest Airlines was little better, running 61% on-time. And American Airlines, which makes a big deal about closing its aircraft doors early to ensure punctual departures, ran just 66% on-time. Meanwhile, passengers on American Flight 2289 from Los Angeles to Miami last Wednesday (July 7) were ordered to sit in their seats with hands on their heads for as much as one hour before landing. The reason? According to a hearing today (July 15) in a Miami federal court, a 27-year-old passenger made wild claims about other people
carrying bombs on the flight. Two air marshals on board contemporaneously disproved the claims, but all other passengers were still hit with the hands-on-head bit by command of the captain. And passengers on an Allegiant Air flight
on Monday (July 12) from Las Vegas to Stockton, California, endured a 17-hour ordeal on the scheduled one-hour run. Finally, power outages yesterday (July 14) at Denver International led to the cancellation of 2% of flights and delays to about a third of the others.
NEW YORK'S HOTEL GLUT WILL ONLY GET WORSE
More than a dozen New York City hotels closed during the pandemic, rates fell dramatically and the city still has properties that have yet to reopen. Even properties that continue to operate are selling for just a fraction of their pre-pandemic values. One example: The Hotel Lexington
, which currently trades as part of the Marriott Autograph Collection
of independent hotels. A REIT (real estate investment trust) called DiamondRock purchased the 725-room hotel in May, 2011, for $335 million. The company unloaded the hotel last week to an unnamed buyer for about $183 million. Into this glut comes news that New York City has three times as many new hotel rooms under construction than the next-highest U.S. market. According to lodging statisticians STR, nearly 22,000 new rooms are in development and about 8,500 are due to open before the end of the year.
Police arrested three men and a woman last weekend before the baseball All-Star Game Tuesday (July 13) in Denver. When cops raided one of the suspect's room at the Maven Hotel
near Coors Field, they found 16 long guns, hundreds of rounds of ammunition and body armor. The man had specifically requested a room with a balcony overlooking the downtown Denver area. The arrest came after a tip from a hotel housekeeper, ironic since hotels are desperately seeking to reduce housekeeping. One of the suspects called the incident a "giant misunderstanding."
has returned to its pre-Coronavirus policy of requiring reservations to be cancelled at least 48 hours before check-in. The only exception? Members of the chain's Choice Privileges frequency program. They'll continue to be allowed to cancel 24 hours before check-in.
BUSINESS TRAVEL NEWS YOU NEED TO KNOW
, the Canadian carrier, wants you to know it's sorry for being a crappy airline. Since June 1, Canadian regulators have received dozens of complaints about WestJet radically altering passenger itineraries and then refusing refunds if the traveler didn't want or couldn't use the new flights. WestJet itself cops to thousands of such incidents in the last six weeks. "Tremendously frustrating for the guests," admits a WestJet PR man. "We are sorry." He also promises the airline is contacting affected customers and offering refunds if they can't use the new flights or the proffered flight credits.
, the much-reviled in-flight Internet operator, is gone. As you recall, Gogo was purchased last December by Intelsat, an international satellite communications provider. And now Intelsat is the name you'll see on flights. A rump division of Gogo still exists on private jets.
SAS Scandinavian Airlines
is restoring flights from its Copenhagen hub to Boston/Logan in September. Flights from Copenhagen and Stockholm to Miami return in October. The airline says that means all pre-pandemic U.S.-Scandinavia routes will have been restored. Frequencies on many of the routes remain sharply reduced, however.