Airline Holiday 2021 Outlook
By admin_45 in Blog
US air travel demand missed expectations this past Summer as Americans continued to stay close to home. How are the latest trends shaping up? Today we address that question with an update on US airline demand using ticket prices as a measure of incremental real-time consumer interest and improvement in airline sector profitability. Computer algorithms set airline ticket prices based on demand to maximize load factors and total revenues, so there’s little human decision-making bias in this data.
Here is a comparison of the cost of a non-stop, round-trip flight from New York to Orlando over the weeks of Thanksgiving and Christmas. We included comps over the past few months to show how ticket prices are trending and used Wednesday to Wednesday timeframes to make the data comparable:
Thanksgiving week (11/24 – 12/1):
- 6/15 - $389
- 7/15 – $355
- 9/28 – $177
- 10/14: $183
Christmas week (12/22 – 12/29):
- 6/15 - $261
- 7/15 - $368
- 9/28 - $468
- 10/14: $449
Takeaway: ticket pricing for Thanksgiving declined over Q3 along with the slowdown in the US economy. By contrast, ticket prices for Christmas climbed into the Fall, perhaps as algorithms tried to maximize pricing for eager early buyers of an especially busy period for air travel. Even with these contrasting trends, airline pricing power has clearly stalled out (in the case of Thanksgiving) or pulled back (for Christmas) over the last couple of weeks.
Another way we assess future air travel demand is by looking at US Google Trends query volumes for some major airlines and travel sites. Below is a chart with searches for “Jetblue” (blue line), “United Airlines” (red line), “American Airlines” (yellow line), “Delta Airlines” (green line) and travel booking site “Expedia” (purple line) since January 2019. Here’s what we see:
- Searches for “Jetblue”, “United Airlines”, “American Airlines”, “Delta Airlines” and “Expedia” are down 14 to 33 pct from the same week in 2019, or versus pre-pandemic levels.
- The average of these comps to 2019 is -21 pct versus -11 pct when we last looked in mid-July and -8 pct in mid-June.
- We also find this measure often closely mirrors data from the US Transportation Security Administration. For example, traveler throughput averaged 1.82 million last week (10/4-10/10) versus 2.37 million during comparable weekdays in 2019, down 23 pct.

Takeaway: the average of our Google air travel comps to 2019 has been getting worse since June/July, reflecting waning interest in flying relative to pre-pandemic levels over the past few months.
As for what we make of this data, we have two final takeaways related to consumer spending and the airline stocks:
#1: US airlines seem to have lost pricing power over the last few months in line with the slowdown in US economic growth and what’s proven to be a persistent shift in US consumer spending patterns. We’ve shown in recent reports that Americans continue to allocate their budgets towards durable goods (i.e. electronics and home improvement items) and near-home activities (i.e. restaurants). That’s in large part due to the massive US suburbanization trend as well as other pandemic-related factors, including concerns about the virus and mask mandates.
Both airline ticket pricing and Google search data – a forward indicator of intent – show only tepid US interest in flying over the holidays. That’s potentially worrisome for early 2022 given that holiday air travel typically correlates with the strength of consumer demand in the coming months.
#2: What do we do with airline stocks here? Despite a disappointing Summer 2021 for air travel, the stocks of major airlines are still up year-to-date and saw a boost in the back half of September. They’ve trailed off since, which makes sense amid rising fuel costs with little pricing power to pass those expenses on to customers unlike other industries in the current environment (i.e. food, apparel, cars, etc.).
Nevertheless, we are still positive on the group in the longer term (8-12 months) as they start to trade off 2022 fundamentals. During that timeframe, international and business travel demand should improve and Americans should feel more comfortable with longer distance trips especially if mask mandates ease. Airline stocks will likely trade in a choppy fashion during the near-term due to the challenging dynamics we’ve outlined, but they tend to work quickly once pricing and load factors visibly improve given that this industry is highly levered to volumes and price.