United Airlines CEO has optimistic outlook for the airline. After aggressive management of 2020, Scott Kirby was delighted to report last week that United expect its core cash burn in March to be positive and, assuming the discussion trends continue, to be positive. As many consider the pent-up question leading to a summer boom with questions about what will come next, Mr. Kirby explains that he thinks there will be more travel in a world after the crisis.
Why Mr. Kirby thinks there will be more travel
At the JP Morgan Industrials Conference of 2021 in 2021, Kirby said the following:
‘I think there will be more travel in the future just for a while. It’s not just the pent-up demand … retail spending has risen, but durable goods are much higher, and things like travel and leisure are down 70%. I think all the durable expenses that would take place in 2022, 2023, 2024 – you have already bought a new washing machine, you do not need to buy another one, people have already bought a new car, done a home repair – the money what was spent was to move forward. It’s going to be a lot more available to spend in ’22, ’23, ’24 for leisure. ‘
Although 2020 was a rough year for the travel industry, not all industries were bad. Much of the spending is concentrated on larger items. According to CNBC, sales of existing homes in the U.S. in 2020 reached levels not seen for more than ten years. Along with home buying, other retail segments had a rising revenue. Home Depot, a retailer in the US, increased sales for the 2020 financial year by almost 20% compared to the 2019 financial year.
Non-airline factors affecting consumer spending
To some extent, airlines compete with several other industries for dollars from consumers. However, some of these expenses do not fall under the control of an airline. While airlines may try to price their competitive price against other carriers, passengers should choose to travel on other items such as a washing machine or a car.
Not to mention, after a passenger has chosen to travel somewhere, there are extra costs such as places to eat and sleep that can be priced higher than the consumer is willing to spend. Even if there are airline prices at the lowest prices to destinations like Hawaii or Jackson Hole, customers can choose not to book if expenses for lodging, dining or car rental do not have the flexibility that some airline tickets have or the low ones. price that a consumer would be willing to spend.
A revival begins to show
Spring-holiday travel is driving the industry to a successful March, and an increase in future bookings leaves airlines hoping for a summer increase in demand. However, it is unclear what happens after a summer boom.
For much of 2020, passengers could not fly to many destinations. During the normally busy summer season, states like Hawaii and New York had access restrictions that severely deter recreational travelers. As the states began to open later in the year, more people visited the destinations. However, the summer of 2021 will be the first peak summer season since 2019, when these states are mostly open for recreation.
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The lack of travel capacity in 2020 has led many people to speculate about the pent-up demand that will come in as vaccinations begin and people gain the confidence to fly. As countries around the world start touring with reopening for tourism, as some European countries have already indicated they are willing to do, it is expected that there will be another increase in international travel due to the pent-up demand.
A summer boom is brewing and simmering, but according to United’s CEO, he believes the summer boom is part of a trend to travel more in the next few years to a year where most people in reality stayed at home or were deterred from visiting the places they wanted to visit. The actual test or mr. Kirby is right, coming in 2022 and 2023 when international travel is expected to start returning.
Do you think that the journey ahead will be higher than the levels before the crisis? Let us know in the comments!