American Airlines Group, Inc. (AAL - Free Report) announced on Jun 29 that it will resume booking its flights to capacity soon. The policy is similar to that of United Airlines Holdings, Inc. (UAL - Free Report) , which had never blocked out seats or put a cap on the capacity of its flights.
However, not airlines are adopting similar measures. The announcement comes amid growing cases of coronavirus across the United States. Also, Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, announced on Monday that all carriers will require passengers to sign a COVID-19 health declaration before boarding. At the same time, A4A said that its member carriers will refund tickets to a passenger who fails the screening test at the airport.
The airline industry has been hit hard by the coronavirus pandemic and now as travel resumes, blocking seats means incurring more losses.
Airlines Start Resuming Booking to Capacity
American Airlines said that customers may notice that “flights are booked to capacity” starting Jul 1. The change comes even though COVID-19 cases continue to surge across the United States. United Airlines has been willing to book all seats throughout the pandemic.
Both carriers said they would notify passengers once a flight has more than 70% of its seats booked, and allow them to change to a less-crowded flight. Other major U.S. airlines like Delta Air Lines, Inc. (DAL - Free Report) , Southwest Airlines Co. (LUV - Free Report) and JetBlue Airways Corporation (JBLU - Free Report) had introduced policies to keep their middle seats empty. American Airlines, United Airlines, Southwest Airlines, Delta Air Lines and JetBlue each carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Empty seats added to carriers’ losses coupled with respective airline policies to make people feel safe about flying.
However, other airlines may also now start lifting the middle seat restrictions. Delta announced at its annual meeting two weeks ago that it could lift that limitation come fall. Southwest had said that it would continue with this policy till Sep 30.
Can U.S. Airlines Bounce Back?
Airlines have been one of the hardest-hit sectors due to the coronavirus outbreak as travel almost collapsed with its rapid spread. Although the federal government announced a total of $12.4 billion stimulus package to bail out the ailing airlines, the crisis is far from over. However, with the economy finally reopening, passenger traffic is increasing.
That said, the revival may not be that easy. A4A on Monday said that U.S. airlines will require passengers to answer health questions before boarding, including whether they have experienced COVID-19 symptoms or have been exposed to someone who tested positive for the virus.
At the same time, the airline industry has requested the Transportation Security Administration (TSA) to start administering temperature checks on passengers as they go through security checkpoints and anyone found to have an elevated temperature — as defined by the Centers for Disease Control and Prevention (CDC) guidelines — will not be allowed to fly and be made eligible for a ticket refund. This means airlines at the last moment won’t be able to sell those tickets and will have to fly with vacant seats.
Last year, U.S. airlines sold a record 85% of domestic seats, helping them to record one of the most profitable years. But that level of demand is not expected for years to come.
However, the good sign is that air traffic is improving despite the spike in COVID-19 cases. On Jun 28, there were 634,000 people passing through TSA checkpoints at U.S. airports, which was 24% of the traffic the same day last summer. The figure is also the highest total since late March and seven times higher than the number of people screened the low point in mid-April.
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