Delta CEO: ‘Starting to see a return of demand’ in air travel
Delta Air Lines CEO Ed Bastian provides an update on the travel industry since taking a hit from the pandemic.
The grand experiment of blocking the middle seat on airplanes has proved what we have known all along about air travel: More people care about a cheap fare than comfort, or even pandemic safety.
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Delta announced on Monday that it was extending its middle-seat block for one more month, to the end of April. Delta, the last U.S. airline to block all middle seats in coach, will consider further extensions based on Covid-19 transmission and vaccination rates.
So far, Delta thinks it's earning goodwill and confidence with customers, particularly business travelers, who aren't traveling now but will come back. Some who've flown during the pandemic have been willing to pay Delta more for more space onboard. Most have been price-sensitive leisure travelers willing to sit shoulder-to-shoulder for cheap fares — on airlines not blocking middle seats.
"This is really about playing the long game and making sure that we are positioning this brand for greater success coming out of the pandemic," says Bill Lentsch, Delta's chief customer experience officer.
The bottom line for Delta during the pandemic has been bigger losses than rival airlines selling all their seats. Delta was the most profitable U.S. airline in the final six months of 2019. That flipped during the pandemic. In the last six months of 2020, Delta had the biggest losses, with a net loss of more than $6 billion, greater than United and Southwest combined.
Mr. Lentsch says Delta can't keep blocking middle seats forever.
A close look at passenger fares and airline preferences during the last six months of 2020 shows far more passengers chasing cheap fares than opting for airlines that blocked the middle seat — even in a pandemic.
Between Atlanta and Chicago, a route where Delta carries the most traffic, Spirit took customers away from Delta with ultracheap fares, according to Transportation Department data. Spirit, which didn't block middle seats, cut its average ticket sold from $132 round trip in the third quarter of 2019 to $68 round-trip in the third quarter of 2020. (Spirit adds lots of fees to the total travel price that aren't counted in DOT fare data.) With that, Spirit jumped to carrying 21% of all passengers on that route in the third quarter. It carried only 9.5% of those passengers a year earlier.
Between New York and Los Angeles, DOT data for the third quarter show Delta had the smallest average fare decline, at 19%. American's fares dropped 43% on average. American and United gained market share while Delta lost market share.
Many factors go into the bottom line at airlines — and in market share on specific routes. But the pattern was clear for Delta. The problem wasn't fares. The airline's average fare collected per mile flown — known as yield in airline parlance — was down only 3% for the fourth quarter while American, United and Southwest saw yields drop 15% to 19%, according to company quarterly results.
The problem was emptier planes. Delta had the biggest drop in passenger traffic, filling only about 41% of its seats during the third and fourth quarters, while other airlines filled more than half. American filled 61% of its seats.
Even though Delta passengers paid more — many no doubt attracted to the open middle-seat promise — they didn't pay enough to cover the cost of leaving those seats empty.
Delta's Mr. Lentsch says market-share shifts are temporary: Delta will rebound when business travelers come back.
Southwest experienced similar results. Southwest president Tom Nealon told Wall Street analysts on a conference call that limiting the number of passengers on flights so middle seats would be unoccupied resulted in a hit of $40 million in October and November. In December, after the airline dropped its sales restriction, "we estimate a revenue boost of around $80 million as a result of selling all seats," Mr. Nealon said.
Airlines, including Delta, argue that viral transmission in airplane cabins is low because of robust ventilation systems and requirements to wear masks, and blocking the middle seat doesn't make a difference in terms of health safety. They argue the risk is so low that any increase from a filled middle seat is insignificant.
"It's a bit of a consumer myth that the middle seat has to be open. We don't believe that's true. We believe the middle seat can be occupied with all the different layers of safety," says Sangita Woerner, Alaska Airlines senior vice president of marketing and guest experience.
For Delta, the middle-seat block isn't about safety, Mr. Lentsch says, but a way to give customers "peace of mind" with a little more space onboard.
Several scientific studies of Covid-19 transmission, as well as earlier studies of other viruses on airplanes, do suggest that proximity matters. When an infected passenger is identified, others who became infected were typically seated within a few rows of each other.
"It's not nonexistent," Massachusetts Institute of Technology professor Arnold Barnett says of the risk of becoming infected on an airplane. Dr. Barnett, an aviation statistics expert, has studied the likely impact on Covid-19 transmission from blocking middle seats.
He estimates that about 500 people fly each day in the U.S. are infected with the virus, based on the count of passengers going through security screening and infection rates in the population. That's with an assumption that Covid-19 is less common among people traveling than the general population.
Dr. Barnett estimates the chances of contracting Covid on a relatively full plane at about one in 4,000 or one in 5,000. With middle seats blocked, the risk would be about 40% lower, he says.
"It's just common sense," he says. When middle seats are blocked, at most you have three other people in your row on a typical single-aisle plane, with six seats in each row. If middle seats are filled, there are five others in your row. Behind you, there may be six instead of four. The same in front of you. Being exposed to more people increases the chances one of them may infect you, he says.
"With 4,000 deaths per day in the U.S., in the scheme of things, aviation is not contributing that much to the extraordinary tragedy. But nonetheless, there is a risk," he says.
Eventually, vaccines will reduce risk, infection rates in the population will decline.
"The question of whether you keep the middle seat open will become moot, " he says.
Moving to the Middle
Here's a look at how long airlines blocked middle seats on flights:
Delta: Blocking at least through April 30.
Alaska: Blocking middle seats in extra-legroom rows. Ended regular coach middle-seat blocking Jan. 7.
Hawaiian: Dec. 15
Southwest: Dec. 1
JetBlue: Dec. 1
Frontier: Offered to sell middle-seat block but backed off after outcry. Blocked about 20 seats a flight through Aug. 31.
American: July 1
United: Removed any restrictions early in the pandemic.
Spirit: Removed any restrictions early in the pandemic.
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