After mass criticism, Delta Airlines’ CEO is backtracking on the upcoming planned changes to the company’s SkyMiles memberships and ways to access its Sky Clubs.
During an event at the Rotary Club of Atlanta event on Monday, Delta CEO Ed Bastian said that the company was “listening to the feedback, reading the feedback” and now plans to make changes—to the planned changes.
“We’re still assessing what to do but there will be modifications that we make, and you’ll hear about it sometime over the next few weeks,” Bastian explained. “We need to make certain that we can serve our higher tiers with the level of premium experience that you deserve and you expect.”
Earlier this month, Bastian and Delta announced that starting in 2025, aspects of SkyMiles memberships would be changed, such as only allowing members to reach elite status based on how much they spend on their select SkyMiles credit cards (regardless of how many points they earned through miles on flights), as well as severely limiting who would have access to the Delta Sky Club.
Another announced shift was that American Express Platinum Card and American Express Business Platinum Card holders would be limited to only six visits to the Delta Sky Club per year unless they spend over $75,000 per year.
The news did not go over well with customers, who called the changes “outrageous” and a “miscalculation” — with many threatening to cancel their credit cards and SkyMiles accounts.
@AmericanExpress please explain why I should keep the Delta Reserve Card with the outrageous changes to Skymiles and Sky Club access. @Delta
American Express $AMX and Delta $DAL is not going to be a positive regarding new skymiles loyalty changes. They are completely screwing over their loyal customers and I think they are going to see a mass exodus. No reason to stay loyal. I’m bearish into earnings
“No question, we probably went too far in doing that. Our team wanted to rip the bandaid off and didn’t want to have to keep going through this every year with changes and nickel-and-diming and whatnot, but I think we moved too fast,” Bastian admitted of the “unsustainable” changes. “We will be making modifications and changes because it really matters to us.”
Bastain did not specify how Delta would be modifying the new Sky Club policies.
Delta had hinted at these changes last month after the managing director for Sky Clubs, Claude Roussel, pointed out that customers and loyalty members had grown frustrated with overcrowding.
“We continue to work with our partners and continue looking at this issue. It’s not a done issue,” Roussel told The Points Guy. “We have to continue making progress. Our guests are telling us that. They’re telling us: ‘Listen, we love the clubs. You need to fix the crowding.”
Delta was up just over 26% in a one-year period as of Thursday afternoon.
Nowadays, it feels like every step at the airport takes longer, including boarding the plane.
In fact, it tends to be one of the more aggravating and arduous parts of air travel — but airlines have figured out how to monetize the process, and they’re not eager to overhaul it anytime soon, CNBC reported.
It took about 15 minutes to board a plane in the 1970s; now, it takes 30 to 40 minutes to board roughly 140 passengers on a domestic flight, according to research by Boeing, The New York Times reported.
And airlines are cashing in on longer boarding times thanks to loyalty programs, which often allow passengers to board ahead of those without priority. The share of revenue generated by loyalty programs increased to 16% in 2021 from about 12% in 2019, Reuters reported.
Last year, Delta saw $5.7 billion in cash sales from American Express and other partners, and American Airlines raked in $4.5 billion in cash payments from its partners including Citi and Barclays, according to the outlet.
“The different boarding groups that we see today have emerged because people value their priority in boarding,” Kerry Philipovitch, former senior vice president of customer service at American Airlines, told CNBC. “So airlines are using that to generate more revenue and reward their best customers.”
Turbulence on a Delta flight sent 11 people, including passengers and crew, to the hospital after landing.
Delta Flight 175 was traveling from Milan to Atlanta on Tuesday when “severe turbulence” occurred 40 miles northeast of Atlanta’s Hartsfield-Jackson Airport, per CNN.
“Delta Care Team members are mobilizing to connect with customers on Delta Flight 175 that experienced severe turbulence before landing safely in Atlanta Tuesday,” a Delta spokesperson confirmed.
The extent of the injuries is unknown at this time. The aircraft was carrying 151 passengers and 14 crew members.
According to a study published in June by researchers at the University of Reading in England, the annual duration of severe turbulence has increased by 55% from 17.7 hours in 1979 to 27.4 hours in 2020. Researchers have suggested climate change is to blame, as warmer air from CO2 emissions increases wind in jet streams.
On Monday, American Airlinesreached a deal with its pilot union, giving roughly 15,000 pilots an immediate pay increase of 21%, with further raises over the next four years. By the end of the contract period in 2027, pilot compensation at the airline will increase by 46%.
The deal comes after years of pilots across the country advocating for better pay and benefits since the pandemic, when shortages impacted pilots’ schedules and well-being.
In the last four months, United and Delta pilots also reached agreements with their airlines, getting pay increases of 40% over four years, and 34% within three years, respectively.
Although it’s good news for workers, experts are warning thatthe increase could mean higher ticket prices for travelers.
The American and United contracts come at a cost of nearly $10 billion each, while Delta’s is priced at $7.2 billion, according to TheStreet, and some of those expenses may trickle down to consumers.
“I think it is somewhat naïve to think corporations will not try to put all of this through to price,” Doug Kass, hedge fund manager and writer for Real Money Pro, told the outlet. “A lot of industries are very consolidated. Most executives have their comp highly weighted to their stock price. Even worse, in the case of flying, ticket prices will go way up, and the airports will still be a disaster.”
The other alternative, for airlines to simply absorb the costs, could lead to less profitability and dissatisfy shareholders.
For now, the cost of airfare has been steadily decreasing since 2022 highs. According to NerdWallet’s Travel Price Index, the cost of flights was down 18.6% year-over-year in July.
Passengers on the runway at Hartsfield-Jackson Atlanta International Airport were evacuated on emergency slides after a Delta Airlines plane blew out a tire during a rough landing.
The flight, which originated in Richmond, Virginia, had a rear tire pop causing the pilot to slam on the brakes as the plane began to skid. The incident took place around 6 p.m. on Wednesday.
Images and videos on social media show one of the plane’s tires completely flattened; other videos show passengers coming down the emergency slide and being helped by the crew. Passengers were then taken to their terminal via bus.
One Person is injured after a Delta Boeing 757-232 plane (N676DL) landed on Runway 9L of Hartsfield-Jackson Atlanta Intl. Airport , while operating Flight 1437 from Richmond,Virginia. One of the plane’s tires reportedly blew when the plane landed prompting emergency evacuation. pic.twitter.com/RbzD0d4vbE
“We appreciate the efforts of our flight crew and Hartsfield-Jackson Atlanta International Airport first responders to manage through the safe landing of Flight 1437 at our hub Wednesday afternoon,” a Delta spokesperson told FOX Business. “We apologize to each for this experience – nothing is more important than the safety of our customers and crew.”
FOX 5 Atlanta reported that the Federal Aviation Administration will investigate the incident.
Passenger Bruce Campbell told 11 Alive that the Delta team operated in an “organized and professional” manner with “no panic” as customers began to evacuate.
“There are probably 100 ground safety personnel here and 20 vehicles, so the response was amazing,” Campbell told the outlet.
This incident is the latest mishap for Delta Airlines at the same airport.
In June, a Delta flight from Atlanta made an emergency landing when the underside of the plane smacked the runway after the plane’s landing gear did not deploy properly. No one was injured.
In May, Delta passengers were unable to board a flight out of Atlanta due to a massive swarm of bees congregating on the top of the plane’s wing.
Delta Airlines was up just under 33% as of late Thursday afternoon.
There was a lot to buzz about after a Delta flight leaving Houston’s George Bush Intercontinental Airport was delayed for nearly three hours. The Atlanta-bound flight was grounded due to a massive swarm of bees that decided to make themselves comfortable on the plane’s wings.
Passenger Anjali Enjeti tweeted about the incident in real-time, explaining that she and other passengers were not allowed on the plane until the bees decided to move.
The gate agent just announced that they’re getting someone to come look at the bees. Who? Don’t we need a bee expert to identify the queen and remove her and won’t the rest follow?
— Anjali Enjeti (she/her) (@AnjaliEnjeti) May 3, 2023
Ejeti then began to live tweet as events unfolded, first sharing that the airline was contacting pest control before changing route and contacting a beekeeper to come in and safely remove the insects.
Oh wait —- good news — they’re getting a new keeper! They will come and collect the bees!
— Anjali Enjeti (she/her) (@AnjaliEnjeti) May 3, 2023
“Intel from other passengers confirms the plane pulled into the gate and suddenly a mass of bees congregates on the wing,” she wrote.
Then, Ejeti shared that the beekeeper was not actually authorized to remove the bees from the aircraft, so the pilot had to switch gears.
The new plan: captain says he’s going to taxi the plane and hope the bees leave it! He’s not optimistic though. But if they do leave we’ll board.
— Anjali Enjeti (she/her) (@AnjaliEnjeti) May 3, 2023
When that didn’t work, airport personnel tried spraying the wing with a hose and blowing exhaust from another machine onto the wing where the bees were — all to no avail.
Finally, Delta found the grand solution — turning on the plane.
Omg y’all. Entire the flight crew deplaned. Delta decided to give our gate to another flight. As soon as our plane’s engine turned on, THE BEES LEFT!!! All Delta had to do was TURN ON THE PLANE pic.twitter.com/gILlJ8EMZg
— Anjali Enjeti (she/her) (@AnjaliEnjeti) May 3, 2023
“Delta Airlines please give all of these gate agents a pay raise and the day off tomorrow. They are doing an amazing job,” said in a follow-up tweet, confirming that the plane had switched gates, boarded and landed safely in Atlanta.
Delta Airlines confirmed Enjeti’s story in a statement to CNN Travel.
“Bee-lieve it or not, Delta flight 1682 from Houston-Bush to Atlanta took a delay yesterday afternoon after a friendly group of bees evidently wanted to talk shop with the winglet of our airplanes, no doubt to share the latest about flying conditions at the airport,” the airline joked to the outlet.
This isn’t the first time in recent months that Delta Airlines’ staff was praised by passengers for being accommodating amid havoc.
In January, a passenger suffered severe anxiety as a result of turbulence on a Delta flight from Charlotte Douglas International Airport to New York’s John F. Kennedy International Airport. A Delta flight attendant sat on the ground holding her hand until her nerves calmed down.
“We are touched by the kindness shown by this flight attendant, working on a Delta Connection flight, and proud that this humanity is displayed by our people every day,” the company told Entrepreneur at the time.
Delta Airlines was down just over 24.7% year over year as of Thursday afternoon.
A passenger was arrested Saturday after triggering a Delta plane’s emergency slide and exiting down the chute, according to CNN. The flight was set to travel from Los Angeles to Seattle.
“The aircraft was holding to taxi for takeoff when the passenger exited the aircraft and was initially detained by Delta staff ahead of being arrested by local law enforcement,” Delta said in a statement, per CBS.
“Customers are being re-accommodated on a new aircraft and we apologize for the inconvenience and delay in their travel plans,” the carrier added.
The person arrested has not been identified.
The FAA is also investigating the slide incident, per CBS. Airport police in Los Angeles further said the incident happened around 10 a.m.
“Due to the circumstances, FBI has been notified,” Los Angeles Airport Police Captain Karla Rodriguez said, per the outlet.
The incident is part of an ongoing trend of recent air travel-related bad behavior including violence against flight attendants.
The pandemic appears to have intensified matters. In 2021, the FAA investigated 1,081 airplane incidents, which was a 494% increase compared tothe average number of incidents investigated in years previously.
There’s also been a rash of “close calls,” where airplanes have come in close range of each other.
The National Transportation Safety Board Chair (NTSB) Jennifer Homendy called a rise in safety incidents “concerning.”
A photo of a Delta Air Lines flight attendant holding the hand of a nervous passenger has gone viral after being posted to Facebook, according to WSOC-TV.
“This woman was so nervous about flying, so he explained every sound and bump and even sat here holding her hand when it still got to be too much for her,” original poster, user Molly Simonson Lee, wrote on the platform.
Per the Facebook post, the flight was a Delta flight from Charlotte Douglas International Airport to New York’s John F. Kennedy International Airport. The flight attendant has been identified as Floyd Dean-Shannon.
He “deserves a raise,” Simonson Lee wrote. Her post was shared more than 11,000 times.
Delta told Entrepreneur via email it was a “Delta connection” flight, meaning it is operated by a regional carrier but is under the company’s brand name. It did not say if Dean-Shannon would get a raise.
There is currently a shortage of attendants on flights, Axios has noted.
“We are touched by the kindness shown by this flight attendant, working on a Delta Connection flight, and proud that this humanity is displayed by our people every day,” the company said.
Delta takes customer service to new heights. A flight attendant went above and beyond to comfort a passenger who was feeling nervous about flying. This heartwarming gesture has been shared thousands of times on social media, making it the most lovable moment of 2023. pic.twitter.com/3XQexWx2Sr
Delta Air Lines will start to implement free WiFi on its planes beginning in the new year, the Wall Street Journal reported.
Bloomberg / ContributorA traveler in 2018 working from the Salt Lake City airport in 2018.
The outlet cited “people familiar with the matter.”
The plan is reportedly to add WiFi “on a significant portion of its airplanes before turning on the service on more of its fleet through next year,” the outlet wrote.
Delta recovered in the second quarter this year to its pre-pandemic revenue levels, per Airline Weekly
Delta CEO, Ed Bastian, has also said going back as early as 2018 that he wants WiFi to be free on planes — but it’s no simple thing to achieve, technologically speaking.
In 2021, the company began working with communications provider Viasat to give customers better internet service, which you can buy for $5 on some of the company’s planes.
Southwest briefly tested free WiFi offerings earlier this year for a little over a month. JetBlue is currently the only carrier that currently provides free internet for all passengers.
Ryan Ewing, founder of the blog AirlineGeeks, told Condé Nast Traveler earlier this year that it is expensive to add WiFi to planes.
“It can cost millions of dollars just to equip one airplane with high-speed internet,” he said.
“It’s certainly not cheap. It depends a lot [more] on the actual hardware than it does on just flipping a switch and going, ‘Okay, can we make it free?’” he added.
Delta did not immediately respond to a request for comment.
LISBON, PORTUGAL – JULY 22: TAP Air Portugal Airbus A321Neo, first flight using SAF – Sustainable … [+] Aviation Fuel, takes off to Ponta Delgada, Azores, on the day it was signed the partnership by TAP CEO Christine Ourmières-Widener, Galp CEO Andy Brown, and ANA CEO Thierry Ligonnière, at Humberto Delgado International Airport on July 22, 2022 in Lisbon, Portugal. TAP, Galp and ANA – Aeroportos de Portugal have entered into a strategic partnership for the development, production and supply of sustainable aviation fuels (SAF – Sustainable Aviation Fuel) on a large scale, from waste, recycled used oils and other sustainable raw materials. This partnership is in line with the European Commission’s Fit for 55 climate package, which includes the ‘RefuelEU Aviation’ legislative initiative aimed at increasing the supply and demand for SAF in the European Union and its use by 2% by 2025, 5% by 2030, and 63% by 2050. (Photo by Horacio Villalobos#Corbis/Corbis via Getty Images)
Corbis via Getty Images
Does the aviation sector have its head in the clouds? Indeed, the experts are working hard to make hydrogen a sustainable aviation fuel.
Given the expansion of the production tax credits and the funds for regional hydrogen hubs, hydrogen’s stock is rising. Its possibilities lie in the hard-to-decarbonize industrials or things that cannot quickly electrify. That applies to planes, trains, ships, and long-haul trucks. Electric generators can also run on a blend of hydrogen and natural gas.
“We see the technology coming and the cost coming down. The price of natural gas is lower than today’s price of hydrogen,” says Judith Judson, head of hydrogen at the National Grid, in a webinar hosted by Our Energy Policy. “But with tax credits, the economics are moving in the right direction. Like wind and solar, the prices will come down. In meeting our net zero goals, hydrogen has a role to play. Our goal is to see green hydrogen produced from renewable energy. We plan to eliminate fossil fuels, but we want to do so affordably.”
Green hydrogen-derived sustainable aviation fuels may be a long flight, but that plane will take off within 15 to 25 years. Consider Delta Airlines: Louisiana-based DG Fuels is supplying it 385 million gallons with 75%-85% fewer lifecycle greenhouse gas emissions than conventional jet fuel.
Various forms of renewable energy make up sustainable aviation fuels. That includes food waste, animal waste, and sewage sludge, which easily mix with jet fuels. The U.S. Department of Energy says its carbon footprint can be 165% smaller than petroleum-based jet fuel. A study by Clean Sky 2 and Fuel Cells & Hydrogen 2 says that hydrogen-powered aircraft could be ready for flight as early as 2035, although 2050 may be more doable for longer flights.
Azul Airlines, British Airways, Jet Blue, KLM, Lufthansa, Scandinavian Airlines, United Airlines, Virgin Australia, and Virgin Atlantic have already used biofuels for commercial flights. As for Jet Blue, it is using sustainable aviation fuel at its hub in the Los Angeles International Airport. It works with World Energy and World Fuel Services INT to get sustainable aviation fuel.
“Our ultimate goal is to achieve climate-neutral aviation by 2050. Turning this ambition into reality requires the seamless integration of a range of important new technological advancements, one of which is hydrogen-powered aircraft,” says Axel Krein, Executive Director of Clean Sky 2 Joint Undertaking.
From Airport Hubs to Hydrogen Hubs
A diesel all-aluminum 4-cylinder OM 654 unit combustion engine sits on display beside a … [+] Mercedes-Benz E220 automobile during Daimler AG’s TecDay Road to the Future event in Stuttgart, Germany, on Thursday, June 9, 2016. Mercedes-Benz will start selling a fuel-cell electric version of its GLC sport utility vehicle next year, an effort to broaden the appeal of the technology with the first publicly available battery that can be charged both with hydrogen and at a wall socket. Photographer: Krisztian Bocsi/Bloomberg
Besides the production tax credits provided by the Inflation Reduction Act, the Bipartisan Infrastructure Law that passed a year ago includes up to $7 billion to establish between 6 and 10 regional hydrogen hubs across the country. The goal is to create a network of hydrogen producers and industrial consumers with an interconnected infrastructure to accelerate the use of clean hydrogen — part of the White House’s plan to reach net-zero targets by 2050.
For example, the hubs want to optimize each region’s strength — comprised of their natural resources and their industrial base. Some regions are rich in natural gas, while others have a lot of solar and wind energy potential. At the same time, companies must stand ready to buy the resulting hydrogen. Critical to the pursuit: converting legacy infrastructure and building new pipelines.
“The regulatory environment is key,” Thomas Green, a fellow with the Energy Department’s Hydrogen Fuel Cell Technology Office, said during the program. “We need to lower barriers and ensure stakeholders are engaged while assuring the highest amount of environmental fidelity.”
Today 99% of all hydrogen is produced in reactions involving coal and natural gas, considered “grey hydrogen” that does nothing to limit CO2 emissions. The aim is to produce hydrogen from low-carbon energy sources — green hydrogen — and expand its use in the transportation and power generation sectors. In its Hydrogen Economy Outlook, Bloomberg New Energy Finance says it could supply 24% of the world’s energy demands by 2050 while cutting CO2 levels by 34%.
For that to happen, the price of green hydrogen has to fall. The Energy Department is taking an “Earthshot,” launched in June 2021. It seeks to reduce the cost of clean hydrogen by 80% to $1 per 1 kilogram in 1 decade.Currently, hydrogen from renewable energy costs about $5 per kilogram. If the program is successful and the price falls, the potential has no bounds: steel manufacturing, clean ammonia, energy storage, and heavy-duty trucks, says the agency.
Providing the Rocket Fuel
The world’s first industrial-scale hydrogen plant, owned by Enel SpA, operates in Fusina, near … [+] Venice, Italy, on Monday, July 12, 2010. Enel over the next five years plans to spend 7.4 billion euros on research and construction of hydrogen plants, wind farms, solar power, and other technologies that are cleaner than its coal, gas and oil-fueled plants. Photographer: Alessandra Benedetti/Bloomberg
National Grid’s Judson says that her utility would be a corporate buyer of the hydrogen fuel. It would help balance the supply and demand, benefiting electricity customers. She says that hydrogen and renewable natural gas derived from organic waste could be blended, powering gas turbines while using the existing wires and substations.
Hydrogen can be used in fuel cells to generate power — a chemical process that splits hydrogen from oxygen. There are no emissions — only water vapor. How? For example, battery-stored solar electricity is run through an electrolyzer to create pure hydrogen gas. While solar costs have dropped by 85% over 10 years, the focus now is on achieving economies of scale for electrolyzers.
While hydrogen can be injected directly into the existing natural gas turbines or the pipelines that carry it, the blending rate is only 20%. The Intermountain Power Project in Utah is converting from a coal plant to a combined cycle natural gas plant, creating a pure form of green hydrogen and transmitting it to Los Angeles.
There are 550 megawatts of fuel cells installed across the country, says Connor Dolan, vice president of external affairs for the Fuel Cell & Hydrogen Energy Association. The users are critical faculties that can’t afford to lose power at any time: data centers and hospitals, to name two. Microsoft MSFT Corp. wants to power its new data centers with hydrogen. The cost to do so is high, but those prices will decrease.
The hydrogen hubs are essential to achieving economies of scale. “This will help bring about cost parity and drive adoption,” says Dolan, during the webinar. “We will see hydrogen for export from the U.S. We would see a huge amount of domestic production, and we might have excess to ship around the world.”
Planes, trains, and automobiles are coming. Honda, Hyundai, and Toyota are creating fuel cell-powered cars, while FedEx Express EXPR is running a hydrogen-fueled delivery truck in New York State with a range of 240 kilometers. But more than 20,000 hydrogen-powered forklifts are already here and used by companies like Walmart WMT and Target TGT .
The groundwork is laid and the public policies are in place, providing the rocket fuel for an emerging hydrogen-powered economy.
Package tours represent a subset of all leisure travel. Higher hotel and rental car rates, along … [+] with fewer home equity funding options, is putting pressure on this segment.
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Supply chain is a term that used to be used only by those in business or logistics. Today, we hear this daily as to why baby formula is not available, or why containers are stacked up in a port. At Dario’s Italian restaurant in Boston’s Logan airport, on a recent visit they had no cream delivered so could not make some of the items on the menu. The waiter said “you know, the supply chain problem.” Airlines have used supply chain excuses to explain late delivery of aircraft or why they can’t meet a pre-anticipated level of capacity. In many things we buy, we realize our dependency on supply chains when things are not available as we’d expect.
Airline travelers are facing supply chain problems in other areas, too. Package tours, meaning vacations bought that include a flight, hotel, maybe a car, and experiences, have been affected because not all opportunities have been available or the prices have been especially high. While leisure travel in general was strong in the summer and has stayed strong into the fall, this category of leisure travel is challenged and represents a small risk to a full airline demand recovery.
Important Segment Of Leisure Travel
People travel for leisure for many reasons. Package Tours make up a small segment of all leisure travel, but this segment is more important to certain destinations. About 30% of travelers say that they want to pack a lot experiences into their vacation. For these people, a package tour can be the way to fill the days. In 2019, my family took a two-week vacation to Vietnam. We worked with a local travel agency who arranged our internal flights, all hotels, and made us aware of many different activities. We likely could have arranged this all ourselves had we taken time to explore and search, but buying the tour was worth it for us and we had a great and memorable time.
Especially internationally, package tours can be way to see things and get access that would be difficult or more expensive another way. When hotels are not available or certain activities are not available due to supply chain shortages, this could change the desire to visit a place. While the amount of travel or number of travelers may not change, these supply chain challenges could affect international leisure destinations the most and correspondingly the airlines that fly these routes.
Staffing Issues Affecting Hotels And Resorts
One of the biggest issues affecting package rates is the sharp increase in hotel and resort rates. One industry executive stated that while the employee shortages were more acute last year, many properties have kept the higher rates put in place at this time even as some of the pressures have waned. Like airlines, price elasticity affects hotels and resorts, meaning that higher rates reduce the demand. While the “revenge travel” idea may mute this somewhat, eventually higher rates will dampen demand.
Consumers often decide a trip based on the total price. Higher prices for air fares and hotel rates means one of two things: some locations will suffer absolute volume, and others will get visits but for shorter stays. For both airlines and hotels, one advantage of a package price is that the amount paid for the air fare and the hotel is opaque to the buyer. This allows the airline or the hotel to offer promotional rates to fill otherwise unused capacity, but in a way that doesn’t invite a competitive match or dilute the non-packaged “rack rates.’’
Car Rentals Still Challenged
Car rental companies returned many vehicles just after the pandemic hit, and still are facing shortages in vehicles in many locations. Just as new cars are facing supply problems, due to chips or other supply chain issues, this has meant that rental companies often don’t have enough vehicles to meet demand. On a recent trip to Florida, we were told that on check-in that no cars would be available for two to three hours. When we walked out to the car area were able to take a Ford F150 that had just been returned, even though we had rented a mid-size.
Another industry executive referred to car rental rates as staying “incredibly inflated.” This, like the flight and hotel issue, adds more uncertainty to the package opportunity that likely will be more highlighted at busy holiday times. It also means that ride share, like Uber or Lyft, will likely to be used more often for some trips. Like the hotels are doing, it is likely that car rental companies will test keeping their higher rates even as they bring car inventories back to demand-satisfying levels.
Housing Prices Can Affect This Travel
One often under-appreciated aspect of package vacations is the relationship with housing prices and valuations. For some demographics, home equity loans are the primary way these vacations are funded. When housing values are high and interest rates are low, there is more equity to tap in a loan to take this kind of family trip. With interest rates shooting up and housing values stalling, this limits the ability to take such a loan or raise the rates to a point uncomfortable for many potential buyers.
This doesn’t affect all buyers of these products, but affects some of it. The industry has seen this in other environments, like in the housing crisis of 2008-2011. During this time, some of the most price-sensitive travel just vanished as people’s source of funding evaporated.
Contributes To Revenue Uncertainty
In the recent Delta Airline’s earnings release, CEO Ed Bastian spoke bullishly about the demand environment. He focused on the normal drop off from summer to fall not happening, and pointed out that there are no signs demand is weakening. Most of his comments were about business travel and higher-priced leisure travel. While higher-priced leisure may be an industry strength over the next year, there are still many pressures holding back a full volume return of corporate business travel.
Airline industry revenues may be leveraged more on business and higher-end travel, but the high fixed costs of the industry means that airlines often need to fill in gaps with price-sensitive leisure travelers. When hotel, rental car and other prices for vacationers rise, it adds to the the uncertainty of the revenue environment. While many trends are positive, as Delta pointed out, this strength is not top to bottom and this creates some uncertainty in total revenues. Different airline business models may be more at risk than others for some of these trends.
