“The airline business was perfectly optimized for the economics of 2019.”
With steady revenue flowing in from frequent business travel, baggage fees, and cheap seats, airlines were flying high last year, wrote Byrne Hobart in Marker. But as business travel came to an absolute dead standstill and with consumers experiencing justifiable demand shock for the better part of the year, airlines continue to face an uphill battle with travel analysts and executives saying a full recovery won’t occur until at least 2024. Last week, Delta reported it lost a whopping $5.4 billion in Q3 with revenue down 75% from last year.
Without a second round of government bailouts, airlines have been laying off and furloughing tens of thousands of employees and putting up various assets for collateral, including their profitable frequent flier mile programs. Hobart wrote about how loyalty reward programs — a “high-margin, high-growth business” — may actually be one of the few viable sources of revenue on the flailing sector’s balance sheet that is keeping them afloat right now. But the future of those programs hinges on airlines actually holding onto their flights and routes and not scaling them back.
