In a world where just a few months ago, we had the ability to travel anywhere at the drop of a hat, the global pandemic has temporarily changed our lifestyles. The key to remember is that this is temporary. There will be a transition period where it will not be business as usual, but first necessary corporate travel will begin as we pick up the pieces of our economy, and eventually, people will become more comfortable to travel for leisure. We will come out of this, and when we do, everyone will need a vacation.
The first major holiday will be Memorial Day, the unofficial kickoff to summer. We did a quick look on Delta, to see what airfares look like for domestic and international trips originating from New York City. Here’s what we found as of today, with the caveat as always that airline pricing is dynamic:
May 21- May 25, 2020
Roundtrip Airfare
Domestic Flights:
NYC to LAX – $336 Main Cabin, $1,195 Delta One
NYC to San Francisco – $346 Main Cabin, $1,096 Delta One
International Flights
NYC to London – $757 Main Cabin or $5,600 Delta One
NYC to Paris – $656 Main Cabin, $7,600 Delta One
NYC to Berlin – $1,721 Main Cabin or $7,600 Delta One
We threw in Berlin on international flights, as it looks like Germany will be one of the leaders to strategically get their society and economy restarted. Germany, therefore, would be one of the destinations we would remotely consider for leisure travel at the end of May.
Domestic flights are at price levels that we have never been seen in premium cabins, where you can fly cross country on Delta One for right around $1k, less than a main cabin seat during normal times. However on international flights, price seems unaffected where economy seats are not materially different from this past year when you could get a deal, running from the mid 600s to Paris and mid 700s to London, and maybe even higher than normal at around $7,600 for a destination like Paris on Delta One.
The key to understanding where airfares are right now is capacity, demand and travel restrictions. In early March, airlines started to cut supply by 20%, which steeply escalated to 100% for 72 of the 150+ or so airline carriers through at least the month April. We are betting that this continues through the third week of May before we start to see signs of life again in the air. Major airlines like Delta have cut 70% of their flights, and United over 50%. LATAM, which primarily originates out of South America, reduced capacity by 95% to reflect the border closings of a number of countries like Peru, that left over 1300 Americans stranded until the US State Department intervened. There’s a reason the State Department has issued a Level 4, do not travel abroad warning, where if you’re in a country that has closed its borders and haven’t made it home by now, our personal forecast is you’re on an extended trip until the end of May or June, depending on where you’re stranded.
Countries like France, where in Paris you can’t even leave your home for exercise during the day anymore, are not places where you would want to go at this point, and accordingly airlines are running less flights to these destinations to reflect the demand. For those traveling internationally, there are far fewer flights so you’re not getting great deals to travel abroad, and airlines still have fixed costs to maintain on the longer hauls. For domestic travel, they are still running flights around the country, so the deals are in the premium cabins because those are largely empty. However, airlines are offering scaled down service and food, so flying Delta One right now is not reflective of the regular experience. As of today, TSA has reported approximately a 96% decline in travel as compared to the same time last year.
Overall, we are suggesting to stay in place, and if you’re planning a trip for the end of May, stay domestic, drive or there will be some spots in the Caribbean that we’ll loop back on as we see where this all lands in the next month. Our prediction is within the next year, we will be back to explore new places, and while those in lockdown in France, Spain and Italy have been hit the hardest, we will all walk again in the Jardin de Tuileries in Paris, dance all night in Ibiza and see the architectural moments of Italy, that have survived far more existential threats in their history. It will take time for the world to recover, but we will come back stronger than ever.
