There’s a statistic receiving a lot of attention recently: over one million people were screened at US Transportation Security Administration airport checkpoints on 10/18. Many are viewing that datapoint as an economically bullish sign, with more Americans flying than any day since lockdowns commenced back in March despite virus cases on the rise.
Fair enough, but simply calling out levels or year-over-year comparisons overlooks important factors that helps answer the question “Why precisely is this data improving?” The exact day of the week matters a lot in this analysis, for example, as business travel mostly takes place Tuesday through Thursday and leisure travel is more common Friday through Monday to take advantage of the weekend.
Here’s how we look at the TSA numbers to develop a more robust and useful analysis:
- We matched up the daily TSA checkpoint travel numbers starting with the first Tuesday a week after Labor Day in 2019 (9/10/19) to the first Tuesday a week after Labor Day in 2020 (9/15/20).
- We then calculated the year-over-year percentages of comparable days (Wednesday, Week 1 2019 with Wednesday Week 1 2020, for example) to get a clean calculation.
- Finally, we took an average of these percent changes from Tuesday through Thursday (representing business travel) and Friday through Sunday (accounting for leisure travel).
Here’s what we found:
#1: Both business and leisure travel remain significantly depressed compared to year-ago levels, down 67% and 62% respectively last week.
#2: Both business and leisure travel have been slowly improving over the weeks following this past Labor Day.
- Week 1: -71%
- Week 2: -70%
- Week 3: -70%
- Week 4: -67%
- Week 5: -67%
- Week 6: -67%
- Week 1: -66%
- Week 2: -65%
- Week 3: -63%
- Week 4: -60%
- Week 5: -62%
- Week 6: -62%
#3: At the margin, leisure travel has improved slightly more than business travel over the last six weeks. Leisure travel was down 63% on average versus 69% for business travel over that period.
Bottom line: with work-from-home and Zoom meetings still prominent in the US, we’re not surprised business travel is faring worse than leisure, especially with the dearth of in-person conferences. That said, we will keep monitoring this data because the gains in both business and leisure air travel may well change as health concerns rise or fall in coming weeks.
On a related point, we want to briefly update you on the Google search and airline pricing data we’ve been tracking for several months because these datasets line up closely with the TSA data.
First, a look at US online queries for “United Airlines”, “American Airlines”, “Southwest Airlines”, “JetBlue” and “Expedia”:
- We view Google queries as a leading indicator because travelers usually search for flights and trip activities before actually booking them.
- Searches for major airlines and flight booking site Expedia collapsed after lockdowns started in mid-March.
- Despite a pickup in early June when the pandemic seemed to be improving, queries remain lower than pre-pandemic levels.
Takeaway: Americans continue to show only modest interest in flying. We expect this to continue with US cases now increasing in line with seasonal patterns and amid domestic and foreign travel restrictions.
As for pricing power, here’s an update on airline ticket costs. A few points to frame our analysis:
- Computer algorithms set ticket prices based on demand to maximize load factors and fares, so there is little human decision-making bias.
- We looked at flights the weeks of Thanksgiving and Christmas, and the week before or after to gauge if there are any of the usual price surges this year to account for the typical pickup in demand around those times.
- We used our home base of New York as a starting point, Los Angeles as a popular domestic destination for seeing family, and Bermuda as another common international spot for a holiday break.
Most importantly, California is not currently on the list of high-risk states that New York requires people to quarantine for 14 days upon their return. As for Bermuda, you can travel there as long as you get tested within 7 days before departing New York.
Here are the ticket costs involved:
New York – Los Angeles
- Cost of a non-stop, round-trip flight from New York to Los Angeles from 11/21-11/28: $386
- Cost the week after Thanksgiving from 11/28-12/5: $320 (17 percent lower)
- Cost of a non-stop, round-trip flight from New York to Los Angeles from 12/19-12/26: $223
- Cost the week before Christmas from 12/12-12/19: $224 (half a percent higher)
New York – Bermuda
- Cost of a non-stop, round-trip flight from New York to Bermuda from 11/21-11/28: $354
- Cost the week after Thanksgiving from 11/28-12/5: $365 (3 percent higher)
- Cost of a non-stop, round-trip flight from New York to Bermuda from 12/19-12/26: $354
- Cost the week before Christmas from 12/12-12/19: $357 (1 percent higher)
The upshot: there’s some very limited surge demand for Thanksgiving travel from New York to Los Angeles, but not yet for Christmas. It actually costs slightly more to fly from New York to Bermuda the week after Thanksgiving, but is about the same for Christmas. The algorithm is likely still trying to find the “right” pricing as the holidays get closer, but there’s usually a 2x premium to travel during these holiday weeks versus regular periods.
Overall, airlines and US domestic tourism generally are in for a difficult Holiday 2020 amid both little consumer interest and pricing power. We’re also not confident business and leisure travel will meaningfully improve from here through year end, as virus cases climb to new records. Similar to over the Summer, we expect Americans to largely spend the holidays at home or with close family and friends within driving distance. One silver lining: the money Americans don’t spend on flying this year can be reallocated to more gift buying. That’s another positive for retailers, a group of stocks that’s actually had a resurgence as we’ve reported over the last week.