The Daily Flyer
Happy Wednesday, and welcome to the January 6, 2021 edition of “The Daily Flyer,” The Higher Flyer‘s newsletter that gathers up and summarizes some of the day’s most important happenings in the world of airlines, hotels, award points, and other travel-related things. Today’s feature consists of 21 predictions for 2021 (or rather 11 of them; the other 10 will come in the next TDF installment), as well as huge diplomatic news (that affects aviation), some thoughts on obtaining elite status this year, and, to round it out, some New Year’s resolutions from renowned travel writers.
The Headline Feature
I wrote in Monday’s “Daily Flyer” newsletter: “there are too many variables at play right now to make meaningful assurances for the future of higher flying.” Indeed, for the companies that are banking on a recovery, nothing is certain and the path forward is sure to be bumpy. There’s little that we know definitively right now, and to complicate matters, everyone is operating with the same limited information. For better or for worse though, 2021 is shaping up to be transformative year; here’s a preview of how things could change. Some of the following predictions are as safe as they can be, there are some hot takes too, but with so much up in the air (har har har), my guesses are as good as yours. I’m curious about what you might think. Leave me a comment below or shoot an email to Paul@TheHigherFlyer.org if you’re so inclined.
Without further ado…
1. COVID-19 may not cancel your vacation this year, but it will define the industry in 2021.
COVID-19 was, at around this time last year, a terrifying enigma. Most everyone and everything, from mega corporations and governments down to men, women, and children, scrambled to contain the outbreak from its onset. Among other things, travel was halted, vacations were cancelled, and the world shut down. People grew weary of hunkering down as businesses struggled to stay afloat, and we, generally speaking, grew more comfortable with the risks that the virus posed. If you want to take a trip nowadays, there are options available, and passengers are gradually returning to the skies while hotels beds are filling. This trend will continue in to 2021, but it could easily reverse itself depending on the severity of the pandemic AND how companies, institutions, and individuals respond… or not. Every major development in the industry will, in some way or another, be a reaction to the coronavirus. We’ll just have to wait and see how things unfold!
2. The post-pandemic recovery won’t be as bold or as dramatic in 2021 as people are hoping it to be.
Despite their best efforts, most airlines, hotels, and other travel companies will struggle financially in 2021. Demand will come back eventually and their fortunes may change in the second half of the year, but for the time being, profits will be near-impossible for most as long as the world remains in flux. With hiccups in vaccine distribution, recurring testing and contact tracing errors, inconsistent border restrictions, and the ever-looming threat of a new COVID strain, 2022 looks far more promising simply because many of these outstanding issues will have presumably been resolved. Until they’re all addressed in meaningful ways, many would-be travelers — both of the leisure and business varieties — will opt to stay home (and not inject money in to the industry).
3. Business travelers are the key to recovery, but they can’t be counted on like they used to.
The pre-pandemic thinking used to be that when business class is sold out, legacy airlines turn profits on their flights; their business models are set up to perpetuate this theory. In order to restore revenues to previous levels of financial sustainability, they will need “high value” road warriors to return to the skies and fill their premium cabins to capacity. As long as COVID-19 continues to limit non-essential movements, that won’t happen… and it may never happen. With the advent of Zoom and Teams and the like, employees won’t have to travel for work as frequently (and can save time), companies will be able to drop their corporate airfare contracts (and can save money), and airlines will need to develop creative solutions if they want to boost their sagging bottom lines.
4. Business class fares will be the cheapest they’ve ever been.
Slashing prices as a means to boost sales is the oldest trick in the book, and you best believe that airlines are going to be doing this as the demand for business class dries up. Will great deals entice travelers to fly more in 2021? As long the pandemic is out of control, it probably won’t… But that doesn’t mean airlines won’t try!
5. 2021 will be the year of Frontier (and Spirit and EasyJet and Ryanair and many other low cost carriers).
Business travelers are staying at home for now and maybe forever because of the pandemic’s effects, but widespread feelings of wanderlust aren’t going away. With everyone sheltering in place for such extended periods of time, people are getting increasingly stir-crazy. That desire to get out again, along with new scientific studies indicating that flying is relatively low-risk, have led to increased demand for leisure travel. The airlines that serve this segment of the market — low and ultra low cost carriers (LCCs) — are well-positioned to capitalize. In addition to consistently selling cheap tickets, both Frontier and Spirit are introducing loyalty programs that encourage passengers to fly them even more; get ready for more creative and unexpectedly higher flyer initiatives like these. The LCCs will reap the benefits of higher customer engagement while maintaining their low operating costs. They’re still losing money right now, but they’re well-positioned to profit when the turbulent times settle.
6. There’ll be plenty of tempting higher flyer opportunities in 2021, but many will carry significant risk.
With airlines looking to stimulate demand for flights, cheap fares will abound and unique opportunities will be available to higher flyers in 2021. There will be particularly tempting offers for sure — and they’ll feel even more special because of everyone’s eagerness to hit the road — but assessing risk and then potentially exercising restraint will become a necessary part of the booking process. With vaccines due to arrive all over the world in the coming weeks, there’s more reason for optimism now, but things can still change quickly. You could think you have the higher flyer deal of the year, but a border closure later or worse, a positive COVID test, and you could find yourself with a non-refundable ticket in a foreign country with no way of getting home (or some equally awful scenario). You’ll want to tread carefully when you do travel again.
7. All the major U.S. carriers will stay in business…
The Big Three U.S. airlines (American, Delta, United) are presumably, given their recent bailouts, too big to fail and will be kept afloat by government subsidies until the pandemic is under better control and sufficient demand is restored. Meanwhile, the encouraging return of leisure travel and the subsequent LCC renaissance will ensure that Spirit and Frontier and the like keep flying without as much trouble. They may not be as busy or as profitable as they were in the years leading up to 2020 — in fact they are going to contract before they expand — but mere survival is a victory given the circumstances.
8. …But one, at the minimum, will make significant adjustments to its business model.
This has already happened elsewhere in the world — Virgin Australia and Alitalia are running much differently now than they were in January 2020 — but not in the United States. Of the U.S. Big Three, American seems to be in the worst financial shape right now; it doesn’t have as much cash on hand as Delta and United do and it is “drowning in debt” too. That doesn’t bode well for making it through a recession. If it wants to stay afloat, bailout money and prayers only go so far. Developing a sustainable business plan is the far more effective remedy, and as industry-wide troubles persist, corporate management teams everywhere will have to think critically about their companies’ trajectories and act accordingly.
9. Alaska Airlines’s entrance in to oneworld will be surprisingly graceful for the time being…
After years of being independent-but-closely-aligned with an impressive roster of partners that includes Emirates, IcelandAir, and a number of oneworld and SkyTeam carriers (among others), Alaska Airlines shocked the higher flyer world last year when it announced that it would enter the oneworld alliance in 2021. In hindsight, we shouldn’t have been so surprised. Not only had it been telegraphing its interest to join, but the move makes perfect sense too. Now Alaska has the opportunity to expand its influence beyond the constraints inherent to a niche regional player and, more importantly, it can better compete with Delta in its home market. This development probably won’t have much of an immediate impact on higher flyers aside from reciprocated elite benefits and greater connectivity options from/within the Pacific Northwest, but let’s revisit this later down the road.
10. …So graceful that it will solidify the groundwork for a potential Alaska-AA merger.
Woah, hot take alert! No way that this will happen this year!
That’s true — there simply isn’t enough time in 12 months to undertake something so complicated — but Alaska and American merging wouldn’t be too far-fetched, especially if AA’s financial troubles persist into 2021 (and beyond). The two companies have spent the past year carefully coordinating and synchronizing their strategies in Seattle — their domestic route networks complement each other nicely with American strong in the East and Alaska in the West — and they’ll build on that in a oneworld partnership that bares the resemblance of a joint venture. Now they’re planning to reciprocate elite benefits and align status levels. These could represent the first steps of a merger, or maybe it’s just wishful thinking. Let’s come back to this one in a few years as well.
11. Beyond Alaska joining oneworld, there will be more alliance realignments in 2021 that alter the balance of power.
When evaluating the complicated webs of inter-airline partnerships, it’s clear that they’re all held in a delicate balance of power that’s vulnerable to disruption. Consider for example one of the more likely shifts in 2021: LATAM, under the stewardship of its new investor, Delta, will leave oneworld and enter SkyTeam. That’d be a huge addition for SkyTeam (whose presence in Latin America is limited to AeroMexico and Argentina’s small flag-bearing carrier) and an even bigger loss for oneworld (which wouldn’t have a permanent presence at all in the region). What might follow next is downright intriguing; here’s a far-fetched-but-not-impossible prediction:
Oneworld looks to establish new partnerships in LATAM’s stead in Latin America. Brazilian LCC Gol could fit the bill, and indeed, it would offer some connectivity within Southern and Eastern South America (and as a matter of fact, AA already recognized this and moved in). It wouldn’t mesh with the alliance’s more-premium brands though. Hmm, what to do? Elsewhere, AA owns a stake in China Southern, so perhaps it would attempt to bring its Chinese counterpart in to the oneworld family to at least compensate for the LATAM loss. Hong Kong-based Cathay Pacific, which is currently in oneworld, could be so angry by this development that it acts on a long-swirling rumor and announces its intentions to join its Lufthansa Group partners in Star Alliance.
See how messy this could get? Fortunately there’s a good chance of a simpler realignment in 2021 too: Aer Lingus will join oneworld. That would make plenty sense — it’s run by the same parent company as oneworld members British Airways and Iberia — but get ready because no matter what happens, these changes mark exciting, transformative periods for higher flyers and the industry at large.
Are my first round of predictions crazy? Half-baked? Confounding? Let me know what you think either in the comments or by emailing me at Paul@TheHigherFlyer.org! Be sure to check back on Monday, January 11, for the second half of these predictions.
From The Higher Flyer
Behold: the first entry of a new trip report! This one, which draws its name from Southwest’s IATA code WN, explores the ins and outs of the fourth largest carrier in the United States. It’s a huge player in the realm of higher flying, but its operation, its value proposition, and the passenger experience it offers are all quite different compared to its competitors. How does it match up? This trip report will attempt to answer that question and more.
Other developments, discussions, and articles in higher flying
1. Saudi Arabia and Qatar agree to reopen airspace and maritime borders
In 2017, Saudi Arabia triggered a diplomatic crisis when it, along with Bahrain, Egypt, and the United Arab Emirates, broke ties with Qatar. The Qatar-Saudi/Bahrain/Egypt/UAE bilateral relationships have all been frozen since, but interlocutors from the United States and Kuwait have been working to broker a deal and establish a path towards reconciliation. As of January 4, 2020, the parties announced that they’ve taken “significant” steps forward, and as a first one, they will reopen their borders. This is a momentous breakthrough.
These developments have huge implications for the airline industry in the Middle East. Qatar Airways was forbidden from operating flights to, from, or over the other four countries during this period, and as soon as this deal comes in to effect, it will be able to fully restore its regional presence. The tangible effects of this means that Qatar Airways can better compete with its neighbors in the UAE, Emirates and Etihad, and it doesn’t have to fly around the Omani coast and through the Persian Gulf to get to and from its hub in Doha. In other words, it can connect more passengers and while flying shorter, more direct routes. That’s fantastic news for Qatar!
2. Elite status goals in 2021
Matthew, the author of Live and Let’s Fly, is currently is both Executive Platinum on American and 1K on United, and, given the uncertain circumstances, he recognizes that his time with both is limited (even with lowered qualification requirements). He doesn’t want to give up status entirely – becoming a “free agent” is likely out of the cards – but he’s not sure what’s next. Perhaps you can relate too?
For what it’s worth, I’m stumped too. I’m currently Hilton and Marriott Gold by way of the AMEX Platinum card — the former is a great value and the latter is too #bonvoy — and also Hyatt Globalist, which is a no-brainer for a number of reasons (as best expressed by OMAAT). The airline side of the equation is where things get tricky. It’ll be easier than usual to retain my AA Executive Platinum status, but is it worth it, and might there be a better option? I live in Washington, DC and most of my travel is international. With its hub at Dulles, United is conveniently compelling, and its reduced qualification standards are enticing. Too bad though that MileagePlus is rapidly devaluing. Meanwhile Delta offers an appealing passenger experience that’s consistently comfortable, but it’s so hampered by a relatively weak loyalty program/award point currency, unjustified fare premiums, and absurdly high qualification requirements that it’s juuuuust about out of consideration. So, any thoughts? It’s “wait and see” for me too!
3. “11 travel resolutions for when we can go on adventures again”
If you need a pick-me-up or some inspiration for the new year, the Washington Post has just what you need in its featured travel section, “By The Way.” Reporter Natalie B. Compton recruited 11 higher flyers to share their ambitions for 2021 as a means to help you brainstorm your own future adventures. These resolutions are more aspirational than tangible; “I want to be more diligent and conscientious” is the new “I want to fly somewhere once a quarter.” Seeing that there are so many hurdles between the present and responsibly traveling — achieving widespread vaccine distribution is among the biggest of them — it’s hard to make more concrete plans right now. That doesn’t mean you can’t start thinking ahead for what you’d like to accomplish once it’s clear to return to the skies though. Happy dreaming until then!
And that’s it for today. Got any tips? Questions? Comments? Email anything and everything to Paul@TheHigherFlyer.org, or comment below! In the meantime, thanks for reading, fly higher, and see you tomorrow!
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