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It'll be 'three to five years before air travel returns to 2019 levels': Analyst

Helane Becker, Cowen’s Senior research analyst covering airlines, joins Yahoo Finance's Zack Guzman to discuss the outlook for air travel as airlines report quarterly earnings.

Video Transcript

ZACK GUZMAN: Investors are waiting with bated breath to see how bad things are getting in the airline sector. Of course, we got those updates last week from Delta and United with revenue losses coming in as high as 70% and beyond for the quarter year over year. So investors might be bracing for the worst year expectedly.

But of course, there is still the optimism there in the return to travel, as the TSA data that we've been tracking here shows that we topped 1 million daily travelers here in the US for the first time in the pandemic. So what should you be expecting as we get these results rolling in here?

I want to welcome our next guest to dig into that a little bit further here. Helane Becker is Cowen senior research analyst covering airlines. And she joins us now. And Helane, I mean, obviously, this is kind of tough to predict. But that's not my job. It is your job here. So what should we be bracing for when we do get these updates?

HELANE BECKER: Thanks. Thanks for having me. So we are expecting the airlines to talk about their continued cash burn. Of course, that's a big issue. And it will continue to be a big issue, number one. Number two, the other thing we'll be talking about, I think, is whether or not testing will encourage more people to travel and will encourage more borders and quarantines to be lifted.

Third, I think we'll be talking about liquidity. And then, fourth, I think we'll start to shift the narrative away from that altogether and start looking at what the recovery is going to look like, how long the recovery takes.

And I think whether or not there will be another stimulus package would obviously be the final issue that we're listening for tomorrow when, I think you mentioned, three of the four companies report earnings. You mentioned Delta and United reported last week. But tomorrow, we have America and Southwest as the other two big ones, and Alaska Air.

ZACK GUZMAN: Yeah, I mean, when we think about the recovery, too, as I highlighted there, we have seen daily travel data improve on yesterday's show. We were chatting that shift in that recovery with the CEO of Hawaii Airlines, and just want to play what he had to say in regards to seeing that recovery play out here as more Americans, especially travelling to Hawaii, are testing before the flights and what that's doing to provide a boost in travelers. Here's what he had to say.

PETER INGRAM: I think if we can get the disease under control, and if testing becomes more available, and the market develops lower cost options for testing, then maybe we can prove that this is a model that can get us back close to that. But I think we're going to be well beyond next summer before we're back to where we were in 2019.

ZACK GUZMAN: All right, so there you go. I mean, you heard that timeline there, well beyond next summer before you're back to what we saw in terms of air travel last year. Is that kind of right in your mind?

HELANE BECKER: Yes, in a word. So we've said three to five years before you get back to 2019 levels. And even last year was kind of a funky year. Last year was the year where the Max was grounded mid-year. So perhaps we have to think about it from the perspective of 2017, 2018.

But I gave a presentation last week to a virtual conference, and I said there were 964 million passengers who traveled in the United States last year. And we're not anywhere near that right now. I think we're 300. In a normal year, we'd be at 300 million-- more than that, obviously, by now.

But the point being that with borders closed with quarantine rules, it's really frustrating for travelers. I mean, Peter highlighted the fact that, you know, Hawaii has been closed for the past, whatever, eight months, I guess, since the end of March, right, and just opened with the idea that you could be tested before you get on board.

But I mean, it's just gotten to the point of-- I don't want to say ridiculousness, but you plan to trip. You're in Arizona, let's say, on vacation. And you're coming back to New York or New Jersey. And in the middle of your trip, as happened yesterday, the governor puts Arizona on the list of states that now you have to quarantine from.

So how are people supposed to think about that, especially in some cases where they've already gone to work? I noticed in my community, I've seen more and more people getting up early when I'm out walking, because we haven't gone back yet. And I'm starting to see more people in my community getting in their cars to go to work in the morning.

And so as people go back, if they want to take a long weekend somewhere, and it turns out that the governor puts the state on the list, you know, how are you supposed to plan your life? So I think that this whole concept of testing will be hugely important, and if we can make it inexpensive. I don't know if you saw earlier this week, IATA and ICAO were talking about $10 testing.

And if you could get that, I think you would be able to safely open borders. There would be things for people to do. People would travel. I think there's huge pent-up demand. And your point that there's a million people who traveled on Sunday, that's not insignificant. We thought it would be a million people by the end of the year.

And I still think that, but that suggests that leisure is about 85% of the way back. But we need to get 100% of the way back on leisure. And we also need to get business back. And we need to get--

ZACK GUZMAN: Yeah, and that would be my last question to you as well, because if leisure's already 85% back, it does leave questions for how much upside we're going to have when we hit the holiday season because I imagine that the bulk of that is not business travel.

So when we see that factor in here, if we're already hitting kind of the only thing that's going to be the boost for these airline stocks here in October, talk to me about the real bankruptcy risks that might exist here, because I think that was real back in March when no one knew what was going on. But now, as we think about [INAUDIBLE] what could come, is all of that out the window now when we look at airlines?

HELANE BECKER: I don't think so. I mean, there's still risk. You know, earlier on, you mentioned the airlines are still looking for stimulus money. You know, my view is it doesn't pay to give them more money if you're going to keep the borders closed, and you're going to put quarantine rules in effect. Otherwise, six months from now, we'll still be in the same position we are now. And we won't have any more people traveling.

To your point, companies are trying to figure out how to bring their own employees back, let alone how to accept visitors. So, you know, things are still, depending on where you are in the country and where the hotspots are, things are still very much-- and I don't mean to be punny, but up in the air.

And when you think about the holiday season, that million, maybe we get to a million 2. I feel like with visiting friends and relatives, we could get another 20%. But without more business and international, we're not getting anywhere near where we were a year ago. It's just not happening.

ZACK GUZMAN: Yeah. Yeah, that's a good point. And it's part of the reason I know in your notes, as we brace for this next slew of earnings, why you do like some of those carriers more levered to leisure. I know Southwest is one of your picks there as well. We'll see what happens when they all report, but Helane Becker, Cowen senior research analyst covering airlines, I appreciate you coming back on to chat.

HELANE BECKER: Yes, thanks for having me.