Return to normality in sight as travel recovers

The global travel industry is buzzing in a post-Covid rebound, and we can soon expect the same in our region.

United Airlines last week announced plans to buy 15 supersonic planes. US airlines are now reporting steady improvement in their business. Picture: AFP

Victoria’s Labor Party has tried every possible angle to blame the federal Coalition for the state’s travails while failing to make the simple observation that no other state in Australia is experiencing any of the same problems.

One of my Melbourne-based colleagues currently has a cold. He lined up for a Covid test last night. He now has to wait 48 hours for his results. Forty-eight hours! The longest I ever waited for a test result in NSW was seven hours, and the shortest wait was three hours.

What’s more, with Victoria now in an extended lockdown, it is crucial to acknowledge the federal government’s stoicism in the face of breathless demands from some corners to bring more flights in from India and elsewhere while the pandemic is still raging.

A much more pressing ongoing concern is the possibility of an outbreak in a still largely unvaccinated Australian population. The media’s hatchet job on the AstraZeneca vaccine’s side-effects must take some of the responsibility, injecting doubt in the minds of those who might otherwise have jumped at the chance to be protected.

Yet every cloud has a silver lining, and outbreaks will prompt more individuals to seek out and secure a vaccination.

The benefits of vaccinations extend beyond health to the entire economy. Elsewhere globally, well-advanced vaccination rollouts have resulted in many industries returning to something approximating normal.

US airlines, for example, are now reporting steady improvement in bookings data since March. Indeed, in the last three weeks, booking volumes and prices for July travel have returned to near 2019 levels, with some flights back to 90 per cent capacity.

Reflecting just how quickly travel activity can return to normal, US domestic air traffic for July will only be down 5 per cent on 2019 levels. This compares to being 40 per cent down only a few weeks back. As the northern summer approaches, US leisure travel operators believe the numbers will improve further. They now expect July leisure travel to be above 2019 levels.

In terms of pricing, US tourists have experienced a significant jump. Prices for June travel were 20 per cent down on 2019 prices. July prices are down only mid-single digits currently, and prices should be on par with 2019 levels as June progresses.

In other words, thanks to almost 102 million vaccinations in the US, both air traffic and flight prices will soon be back to 2019 levels.

August is already looking equally good, and a return of the corporate traveller is all that is required for domestic travel to have fully normalised.

For travel in June, corporate bookings were down 75 per cent compared to the same month in 2019. But recovery is under way here too. Corporate bookings were down 50 per cent for July.

The reopening of offices will be essential to spur intercompany and intracompany visits. Staff at many US companies have returned to the office a few days a week. They are now planning for the bulk of employees to return by Labor Day, September 6.

Recent corporate surveys reflect improving expectations that 2022 will be the year activity returns to normal. The most recent surveys now suggest around 80 per cent of respondents believe 2022 will be “normal”.

Further, the removal of the indoor mask-wearing mandate in the US means large conventions and internal company meetings can resume. This change to the CDC’s (Centers for Disease Control and Prevention) guidance will incentivise those who have hitherto resisted vaccination.

The last leg of the US travel industry’s recovery will be international travel, which for July is estimated to be down 50 to 70 per cent and reflects ongoing travel restrictions. Keep in mind the US, like Australia, is still at maximum international travel restrictions.

But a transatlantic reopening could occur in the next few weeks, with Britain and the US link expected to be the first knot tied. An unrestricted opening with Europe is expected by October, and with 40 per cent of revenues for large US airlines derived from international travel, the benefits are palpable.

Your health and wellbeing are your responsibility. And so vaccination is your responsibility. I have had my first jab. No government got in my way to prevent it. You should go and get yours. The sooner you do, the sooner we can all enjoy the benefits.

Roger Montgomery is the founder and chief investment officer at Montgomery Investment Management.