Cowen Senior Research Analyst Helane Becker joins Yahoo Finance Live to discuss Labor Day weekend travel trends, the outlook for business travel, staff shortages amongst airlines, and initiatives pushed by the Department of Transportation.
DAVID BRIGGS: The summer of travel hell went out with a bang. TSA numbers show that, for the first time over the holiday weekend, the TSA screened more passengers than they did pre-pandemic. The TSA screening 8.76 million passengers this past weekend.
Joining us now for a look ahead is Cowen Senior Research Analyst Helane Becker. Nice to see you. So what happened? We expected this to be a disastrous weekend, like all those prior this summer. Are they getting a handle on those issues that plagued the airlines throughout the summer?
HELANE BECKER: Well, yes, in part. Weather was a little better this weekend on the three or four, five days that you measured. So weather was a little better. There were still cancellations, but it wasn't, to your point, as bad. And remember, the airlines have cut a lot of capacity since May and will continue to keep those capacity reductions in place into next year. So they have fewer flights. So when things go wrong, they have more availability to recover.
RACHELLE AKUFFO: And so as we look at some of the price targets for some of the airlines that you cover there, what are there-- are there sort of common threads that you're looking at? And who are the strongest performers?
HELANE BECKER: Yeah, so I don't know how to answer that question specifically, but here's what we think. Businesses are asking their employees to come back to work more now than they were in the summer and maybe in the spring. And as a result, we think that business travel will increase here in the September to November time frame, number one.
And that thread suggests to us that airlines with a reasonable amount of business travel, like United, American, and Delta, as well as Alaska Air, will outperform those that have fewer business travelers, in general. International, we think, with restrictions being lifted around the world, people will travel internationally again. So we're definitely seeing that.
We estimate that domestic travel, just domestic leisure travel, has grown between 35% and 40% in the past three years. And what we think happened in the second half of August was international started to recover some of that. We think international was probably down 40% or 50%. This summer, we think business travel is recovering a little bit, probably down closer to 50% than it was pre-summer.
So we think the outlook is improving. Tomorrow, we actually have our major transportation conference, our 15th Annual Global Transportation Conference, and most of the airlines are presenting. And so we're hoping for some updates to what they're seeing, especially for bookings here in September.
SEANA SMITH: Helane, what do bookings, do you think, look like in September? And drilling down into that business travel number that you were just talking about, we have been covering time and time again how more and more companies are mandating that their employees return to the office this fall. That, of course, will probably mean that more employees will be hitting the rose-- roads. Business trips, of course, will become the norm. How does that, though, compare to what we were seeing pre-pandemic?
HELANE BECKER: Yeah. So I think in terms of business travel, the number of people who travel to any conference will probably decline relative to where it was in 2018. Perhaps the number of conferences that you go to, that people go to, will decline. So instead of going to three conferences a quarter, which would work out to about one a month, maybe you go to one every six weeks, so you go to two a quarter. And so we think that will decline.
But I see my own schedule and I see the number of conferences I get invitations to, and they seem to be increasing quite a lot here in September and October. And in-person conferences, we aren't seeing too many virtual. I think people are kind of over the Zoom meeting and the Zoom conference. They just want to get together in person now.
DAVID BRIGGS: Helane, what do you think the investor story is for the major US airlines? And what lies ahead for the JetBlue merger? How significant will that be in shaking up the industry?
HELANE BECKER: Yes. So as far as that question goes, nothing's going to happen for at least another year or maybe longer. You won't see any change, so very little shake up in the short term. JetBlue will continue to compete with Spirit. It will continue to go down its path of where it wants to grow, as will Spirit.
It has to go through the regulatory process, which will take at least a year. And then when they do merge, which we're thinking first half 2024 at the earliest, it will probably be another one to three years before they even get a joint operating certificate. So there's not likely to be significant change between the two companies much before 2025 or 2026. So nothing to really think about there. It's just waiting is so difficult.
As to the first part of your question in terms of investors, so we think there are three or four things investors are concerned about right now. One is pilot availability. Are airlines getting enough applications to replace the pilots that are retiring? And we've heard about that all year long. And raising pilot pay alone isn't going to do it. And then-- that's number one.
The second thing for investor concern is the economy. And it's not only the US economy. It's kind of the world economy, especially in Europe. Lot of airport issues in Europe. There are caps in Amsterdam and in London in the number of people they're willing to handle a day.
Tokyo has a cap as well. Part of it is the lack of personnel to handle all the flights that the airlines want to fly, and part of it is just concerns over COVID and new variants of COVID. So that's another investor concern.
And then the economy. What's going to happen to the economy in 2023? Are we going into a recession? What will happen to airlines? I mean, our pushback on that one is that normally in a recession, airlines would cut 4% or 5% of their capacity.
Well, as we know, they've already cut about 15% of their capacity. We're only flying-- airlines are only flying somewhere between 10% and-- 85% and 90% of what they were flying in 2019. So theoretically, they shouldn't have to cut capacity next year, but that is another concern. So I think those are the three concerns I hear most from investors.
RACHELLE AKUFFO: And Helane, I want to just quickly ask you about Transportation Secretary Pete Buttigieg and him really wanting to see some more action on these controllable delays. How much pressure is that putting on the industry?
HELANE BECKER: Well, yes, he would like-- he would like things to kind of get back to whatever normal is and not have so many of these delays. And you saw-- I mean, you reported over last week on the dashboard on the DOTA that he put up. Well, the reality is the DOTA has quite a lot of say in what airlines do. There are a lot of consumer protections already on the books.
What the government has to do is enforce those protections. We have not seen a single fine against an airline in three years. Now, part of it is probably related to the pandemic and the fact that the airlines were desperate for cash two years ago. But the reality is there are a lot of rules on the books that the government could enforce that they choose not to. So that's one thing that I would push back on, just enforce the rules you have rather than adding yet more rules because the industry is already highly regulated, and more rules isn't going to help.
I think the biggest issue, to your question, is refunds and the fact that airlines don't like parting with money. They want your money pretty quickly when you book your trip, but they don't want to give it back when something happens. They want to give you a credit. And I think if they were willing to be a little more flexible on the cash refund part, you would see some improvement in the way people think about airlines because, to me, the three biggest issues are delays, cancellations, and refunds.
SEANA SMITH: Helane, real quick because we're running out of time here, but from the conversations that you've been having-- of course, I know you very close-- you follow this sector very closely-- has that conversation started to change at all just in terms of how these airlines do view refunds if you think that would really help them really improve how consumers think about them?
HELANE BECKER: No. [LAUGHS]
SEANA SMITH: The short answer.
HELANE BECKER: The short answer--
SEANA SMITH: Maybe they should be taking your advice then, Helane.
HELANE BECKER: Exactly. The short answer to the question is we have not yet seen any change.