Here's What Airline Execs Are Saying (Anonymously) About U.S. Demand
Plus: United resurrects an old plan in Hong Kong, and I love it.
Dear readers,
Earlier this week, I asked a big-time airline executive — who said his airline's business is OK but softer than expected — if investors are too negative after recent reports about falling demand. This person immediately texted back a clip of comedian John Mulaney. I figured this was a mistake, the texting equivalent of a butt-dial, but watch it and you will understand, as I did.
"This guy being the president, it’s like there’s a horse loose in a hospital," Mulaney says. "I think eventually everything’s going to be OK, but I have no idea what’s going to happen next. And neither do any of you, and neither do your parents, because there’s a horse loose in the hospital. It’s never happened before. No one knows what the horse is going to do next — least of all, the horse! He’s never been in a hospital before! He’s as confused as you are!"
We saw evidence of this unpredictable (or is it crazy?) situation this week, as the administration rolled out its tariff plan. And while it will take some time to fully understand the effects of the tariffs (which I think will be very bad), the problem airlines are facing today does not require a lot of high-level thinking to understand: If people and businesses feel like they will have money in the near future, they will buy plane tickets. And if they don’t feel certain about the future, they won't buy as many, and they'll spend less time traveling.
Most of the public data on demand is backward-looking, and it’s not great. ARC’s February sales data suggests that U.S. carriers struggled that month, with total sales decreasing by 3.54 percent year-over-year, and passenger trips falling by 1.34 percent (1.91 percent for domestic, and 0.43 percent for international). Meanwhile, IATA reported this week that U.S. passenger traffic in February decreased 4.2 percent year-over-year — more than in any other domestic market IATA monitors — while capacity decreased 1.2 percent. "Falling U.S. consumer confidence may well have contributed," IATA said.
So we have clear signals from February. This week I set out to answer a simple question: is it getting worse?
I got on the phone with my best sources (executives and insiders who don't sugarcoat things1) to learn what's really going on.
Among my very patient coterie of sources, the consensus was very clear.