The Fate of Airline Fare Deals During the Coronavirus Crisis
By Chris McGinnis, stamford advocate | Mar. 08, 2020
As the coronavirus scare barrels through the travel industry, forcing cancellations of business trips, meetings, events, and vacations, demand for air travel has taken a nose dive.
Usually, when demand falls, so do prices. But so far in this crisis, we've not seen much broad-based fare discounting.
Sure, there have been spot sales, such as the one earlier this week with California-to-Hawaii fares plunging under US$200. (Those fares may still be available, if you are interested.)
Airlines are also deeply discounting the number of frequent flyer miles needed for trips on a handful of routes. For example, I snagged a late March roundtrip flight between SFO and Atlanta on United for just 32,500 MileagePlus miles, but saw them as low as 25,000 miles. That's cheap, especially since late March is peak spring break season. The Thrifty Traveler site, which tracks airline deals, recently reported that American is offering roundtrips from San Francisco and other cities to Buenos Aires for as few as 30,000 miles. Last week, it reported ultra-cheap SkyMiles redemptions on flights to Japan, even in business class.
In addition to these spotty springtime fare and mileage specials, to boost demand, airlines have loosened restrictions on changes and cancellation fees for those brave enough to book in the midst of such uncertain times. Those policies seem to be changing every day, so check airline web sites for the latest versions -- all have links to the policies on their home pages. Regrettably, most airlines are not waiving change/cancel fees on all reservations; instead, they are only waiving fees on reservation made after March 1 (or thereabouts).
But airlines are not discounting fares in a big, broad way -- and definitely not for the summer months. Why? Like passengers, airlines are fearful and uncertain, and taking a wait-and-see approach before promoting deep fare cuts. Southwest Airlines CEO Gary Kelly explained it this way at an aviation industry conference on Thursday: "We could discount prices tomorrow and it wouldn't do any good ... [this crisis] has a 9/11-type feel. Hopefully, we'll get this behind us quickly."
Instead of fare sales, airlines are cutting capacity, with United announcing an 11 percent cut in domestic flying and 20 percent reduction internationally. JetBlue also said it would cut capacity by about 5%. In Europe, Lufthansa said that it is cutting its flight schedules in half. Late Friday, El Al announced that it would make deep cuts to its schedule, including the elimination of its relatively new SFO-Tel Aviv flight. European carrier Flybe just went belly up, further reducing capacity in Europe. Now, all eyes are on Norwegian Air, which serves SFO, as it has been on shaky financial footing over the last year. Can it survive this?
At the aviation conference, Kelly also said that Southwest has not yet decided on whether to cut capacity in light of evaporating demand. Alaska Airlines, the second-largest carrier at SFO, is said to be mulling capacity cuts, but has yet to make it official.
Wondering what might happen to aviation here here, I look to what happened in China since the coronavirus crisis started in early January. According to FlightRadar24, airline capacity there declined a whopping 80 percent since the beginning of the year. There's some hope in the latest numbers that show a slight uptick in the number of flights (see chart below). Will flights in the US decline as much as 80 percent as COVID-19 spreads?
If things get really dire, U.S. airlines could ask the government for help, as they did after Sept. 11 -- and they got US$5 billion. The Trump administration is already hinting about offering airlines a tax break to keep them afloat, if necessary.
So until we see a light at the end of the tunnel, fare sales will likely remain spotty, as airlines, and travelers, try to chart their way through this crisis.
But once we get an "all clear" from health officials, we'll likely seem some big, broad and heavily publicized fare sales, the likes of which we have not seen since the year following Sept. 11. We will also see airlines use their frequent flier programs to lure travelers back in the air with perks like mileage bonuses, or liberalization of elite status requirements.
If COVID-19 begins to clear by Easter (April 12) as the weather warms, we could see some of the best summer fare sales in years -- airlines will do all they can to get people back on planes, getting over their fears about flying, and relieving their pent-up demand to travel. But if we see a deepening of the crisis in coming months, both the peak spring and summer seasons could be a bust for airlines, and the travel industry as a whole.
Until then, it's going to be wait and see for both airlines and passengers.