The high demand for air travel, caused by pent up demand from the pandemic, may be starting to wind down. A new report from Bloomberg shows that purchases made directly through the major U.S. airlines fell in the second quarter. Yahoo Finance Live breaks down the report and explains why consumers may be starting to pull back.
Video Transcript
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SEANA SMITH: We’re going to take a look at some of the trending stories of the day. Josh Schafer is here to help us break it all down. And guys, first up, let’s talk about the travel boom or maybe lack thereof pretty soon, because it might be signs that it could be fading here. There’s new data compiled by Bloomberg and taking a look at flights booked directly through airlines. And they found an interesting trend. And that’s the fact that that number declined in the second quarter for eight of the 10 domestic, largest domestic airlines here.
So you got to ask yourself whether or not inflation is starting to catch up with consumers, when it comes– obviously has a lot of ways– when it comes to spending on travel, an area that we haven’t necessarily seen any weakness in yet, at least for the airlines.
JOSH SCHAFER: And the other interesting thing I saw in that article, Diane, was that they were pointing out that Alaska Airlines actually said that prices came down, right? So when you think about even just– even if demand does come down right and people have less money to spend, also if these airlines are charging less money for the flights, you would need more people to go on the flights. So I think that’s kind of an interesting dynamic at play, too, when you think about pricing power and just flight prices being a little bit cheaper.
Does that mean that all of a sudden we’re going to start taking two flights again? I don’t know. We’re so used to these flights being expensive, right?
DIANE KING HALL: I mean, but it also, you wonder if it’s a tale of two airlines. I mean, you had Delta Airlines doing great. I mean, they hiked their forecast. Delta and United both doing well, though. United had some snafus recently. And it’s certainly not helpful to the airlines when you have all the travel problems and the mess at the airport. I experienced that this weekend myself due to weather, of course, so they can kind of blame it away. And that certainly doesn’t kind of help the travel picture.
I do– I did feel like just– I mean, this is anecdotally that demand was still holding up right now. But again, we’re talking about summer bookings, which are basically done.
SEANA SMITH: Yeah. And it’s very important to point out that this data actually tracks when they are booked rather than– so right now, rather than the airlines who actually obviously don’t really take it into account until the actual flight until you go on the flight, until that revenue is actually produced. But prices, they’re still above where we were in 2019. So they’re down on a year-over-year basis. But 2022, the flights– the prices that we were looking at a year ago was astronomical and not much improvement.
But I think right now, when people are feeling so pressured in almost every aspect of their life, if you’ve already gone on a few trips since COVID, maybe that pent-up demand story that we’ve been talking about for so long, that’s going to fade. And I think this is the question and this was– we were struggling really to try to put the timeline on this of when we would actually see some impact when it comes to the travel names. And at least when you look at this index, and it doesn’t include booking sites, it doesn’t include corporate sales, we are starting to see some of that weakness.
JOSH SCHAFER: Well, and we haven’t even talked about business travel, right, when we’re talking about flights overall and airlines overall.
DIANE KING HALL: –leisure travel.
JOSH SCHAFER: Right. And that’s something that Southwest flagged last week, right? Bob Jordan saying that basically, they’re not seeing business travel come back all the way to the extent that they thought they were going to. And they’re not sure when it’s going to come back. So then you think about that with maybe the general consumer demand that was maybe even a little bit higher than normal coming down. And you have a tough– that’s a tough balance.
DIANE KING HALL: Yeah. The business travel will come back. But will it be enough to compensate for the reduction in consumer? Because revenge spending won’t last forever.
SEANA SMITH: I question if business travel is really going to come back across the board.
DIANE KING HALL: You don’t think so? I think it will.
SEANA SMITH: I don’t know. You would have thought, at this point, maybe it would have. But some airlines are saying that they’re very confident that we are going to get there if they haven’t reached there yet. I’m still a bit skeptical. But we’ll see.
