American Airlines, Delta Air Lines and United Airlines believe corporate demand should continue to remain strong, and Delta is seeing some firming of leisure demand as the US' busy summer travel season begins late in the second quarter.
Delta has consistently offered positive views on corporate demand during the trade dispute between the US and China that has lasted more than a year. Part of that bullishness likely stems from solid US economy. The country posted GDP growth of 3.2% in 1Q2019, and consumer confidence is also growing.
At the beginning of 2Q2019 Delta's management explained in its most recent corporate travel survey, 90% of travel managers expect to maintain or increase their travel spend in the quarter, which was a record for a survey conducted in a second quarter. During 1Q2019 Delta's corporate revenues increased 10% year-on-year as average corporate fares improved by 2%.
American also stated that its recent corporate customer survey showed 90% of respondents plans to increase or maintain their spend year-on-year in 2019.
Delta also cited robust leisure demand at the start of 2Q2019, with forward yields for every month of the quarter in positive territory on higher bookings. That is an improvement over choppiness in leisure trends that Delta saw at the beginning of 1Q2019.
United's new revenue management system Gemini helped the airline post a 13% increase in corporate revenues in 1Q2019. With Gemini, United has been holding more seats for billing later in the booking curve. The airline's double digit top line corporate revenue growth is nearly double its top-line revenue passenger revenue growth of 7.1% for the first three months of 2019.
The company's executives explained United had been very conscious in ensuring it makes changes in its booking curves, and the success it achieved with those changes in 1Q2019 should continue in 2Q2019.
Meanwhile, Hawaiian Airlines is working to finalise the roll-out of its basic economy offering - Main Cabin Basic - and has offered its initial revenue outlook from adding a lower tiered fares to its offerings. The airline is hoping the roll-out of basic economy will ease the challenges of competitive capacity additions in Hawaiian's key markets from the Hawaiian islands to the US west coast.
Southwest Airlines is exerting the bulk of that pressure with its launch of services to Hawaii in Mar-2019. Schedules analysis from CAPA - Centre for Aviation and OAG (as of early May-2019) show that Southwest currently operates flights from Honolulu to Maui, Oakland and San Jose, and from Maui to Oakland. Flights from Oakland and San Jose to Kona are scheduled to begin in mid-May-2019.
Southwest's initial introductory fares to Hawaii were as low as USD49 one-way, which is far from surprising, and the airline will likely create fare pressure in the market for the foreseeable future. Hawaiian's unit revenues fell 3.7% year-on-year in 1Q2019 and its domestic passenger unit revenue dropped 7%.
For 2Q2019, Hawaiian expects capacity from Hawaii to North America to increase by 6%, and increase slightly from those levels in 3Q2019. Hawaiian expects a decline in unit revenues of 2% to 5% in 2Q2019.
"Notably Main Cabin Basic should help us alleviate some of the downward pressure we've experienced as of late on our main cabin yields, especially as the competitive landscape intensifies for the routes between North America and Hawaii ", said Mr Overbeek.