Americans with vaccines in arms hit the road and tarmac this Memorial Day weekend, with travel volumes exceeding any other point during the Covid-19 pandemic thus far. That’s despite still-limited airline capacity and the highest gas prices since 2014.
The Transportation Security Administration, or TSA, saw 1.9 million people pass through its airport checkpoints on Friday—the greatest air passenger volume since the first week of March 2020—and another 1.9 million people on Monday. Cowen’s Helane Becker forecast up to 11 million air passengers over the course of the long weekend.
The AAA, meanwhile, expected that 34.4 million Americans embarked on Memorial Day road trips, with many of them paying more than $3 a gallon at the pump. That would be an increase of some 52% from the same weekend in 2020, during the early months of the pandemic, when gas was much cheaper but the appetite for travel was much lower. GasBuddy data showed the highest U.S. gas demand since the summer of 2019 on Sunday.
Despite the travel rebound, both air and road volumes remain well below their pre-Covid levels. The TSA saw 2.6 million air passengers on the Friday of Memorial Day weekend in 2019, and 2.5 million that Monday. And 37.6 million Americans traveled by road over 2019’s Memorial Day weekend, about 9% more than the AAA’s 2021 estimate.
Nonetheless, with vaccines in arms, savings-rich consumers are showing that they’re ready to leave their homes more so than ever before during the Covid-19 pandemic, and rising travel-related costs aren’t getting in the way. In addition to higher gas prices, the hotel rates, airfares, and rental car prices are all up significantly from a year earlier—but with the former two still below pre-Covid levels.
“The higher prices are not dampening travel plans,” Amherst Pierpont chief economist
wrote to clients last week. “That seems to be a broader theme in the economy. Consumers are so flush and so desperate to get back to having fun that they are much more open to paying higher prices than they have been for a very long time.”
It’s another datapoint in the multitude of signs of building inflationary pressures in the U.S. economy. [Read Barron’s latest cover story: “How To Cash In On The Everything Shortage.”]
As for airlines and other travel firms, rising passenger volumes coinciding with climbing prices are a boost to revenues, partially offset by higher fuel and Covid-related costs. And debt incurred during the pandemic to keep operations afloat will remain a drag on earnings for years. Even if U.S. travel approaches pre-Covid levels this summer, the reopening of high-profit margin international routes will take longer.
But investors have been betting on a recovery sooner rather than later. The
NYSE Arca Airline Index
(ticker: XAL) is up close to 30% year to date, ahead of a 12% rise for the
S&P 500 index.
American Airlines Group
(AAL) stock is leading the pack among major airlines, up 54% this year, versus 34% for
United Airlines Holdings
(UAL), 32% for
(LUV), and 19% for
Delta Air Lines
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