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The impact of the CARES Act on US domestic aviation

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Flightradar24 note: With Flightradar24 data, ICF examined flights in the United States to see how airline networks and routes have been impacted and what characteristics, if any, the busiest and most impacted routes share.

Flight activity is at record-low levels, as airlines ground significant portions of their fleets and suspend services across their route networks. But while international travel is almost non-existent, the US and China domestic markets have proved surprisingly resilient. In the US domestic market, even the reduced capacity is higher than demand due to the minimum service levels required by the US Department of Transportation (DOT) should airlines wish to receive funding through the Coronavirus Aid, Recovery, and Economic Security Act (the CARES Act), though recent exemptions approved by the DOT will reduce the number of flights certain airlines are required to operate.

US Routes by week
Source: Flightradar24 data, ICF analysis Notes: Only routes with 10+ flights over each respective two-week period are shown.

The Agreement between the DOT and participating US carriers defines the eligibility criteria for federal funding, which is focused on route service levels across the airlines’ networks, resulting in airlines operating to at least these minimum levels. One example is Southwest Airlines (with a domestic market share of over 10%) who appear to be operating to the minimum required frequency thresholds (i.e. 5x weekly departures for all points/airports that were scheduled to be served more than 25x per week in Feb 2020). Interestingly, as of 21st April 2020, the low-cost carrier appears to have reduced the number of flights year-over-year across all its points by around 80% (with a couple of exceptions), regardless of the size of the point. Thus, some of the smaller routes are operating at the minimum levels, whilst flight frequencies on the airline’s largest routes are significantly above the minimum threshold. The airline has however made more varied adjustments to frequencies on the route level, with year-on-year changes on routes ranging between -60% to -80% in the week ending 21st April 2020. Whilst the financial support available under the CARES Act is likely to be critical to airline survival, flight frequencies on many routes are likely to be inconsistent with actual passenger demand. Load factors are an indicator of this inefficiency, as they reached average lows of 11% in early April (source: Airlines for America) before rising to 22% (week ending 6th May) due to further capacity reductions.

Despite much of the US domestic market being operated at the minimum required levels, airfares have also reached record lows to stimulate demand for those willing to travel, and in some cases have been free for essential worker travel.

Based on our analysis of Flightradar24 data, only 30% of US domestic routes are operating over 50% of capacity compared to the same week in late April 2019. The busiest domestic routes continue to see a mix of scheduled and non-scheduled operations for both passenger and cargo flights. Across the largest 10 domestic routes, the weekly number of flights has reduced by 78% over the six weeks between early March to mid-April.

Top Impacted City Pairs by Number of Flights (1st week of March 2020 vs. 3rd week of April 2020)
Source: Flightradar24 data, ICF analysis
Notes: Both pax & cargo commercial flights included. 1st week of March ending 3rd March , 3rd week of April ending 21st April. “MEM-PDX – 8” indicates there were 8 daily flights in the week ending 21st April

The chart above shows the extent to which selected routes have been impacted. While certainly in the minority, all growth routes in the US domestic and international markets appear to have been driven by the increased number of dedicated freighter movements. Both domestic and international growth routes are to major cargo hubs, such as FedEx’s bases at Memphis, Los Angeles, Anchorage, and Oakland, and UPS’ base at Louisville, Kentucky. The international growth routes, many of which are between US and Asia likely for the trade of medical equipment to fight the COVID-19 pandemic, feed into these domestic hubs.

Change in Passenger & Cargo Mix by Weekly Frequencies for the Top 10 Busiest City Pairs Since 1st week of March 2020
Change in Passenger & Cargo Mix by Weekly Frequencies for the Top 10 Busiest City Pairs Since 1st week of March 2020
Source: Flightradar24 data, ICF analysis
Note: Analysis excludes flights that were categorized as charters given unknown variables and foreign passenger carrier callsigns that appeared on domestic route pairs and are unable to sell US to US tickets.

As with the most impacted routes, the busiest routes have also seen a change of mix from passengers to cargo that could be a combination between a reduction in passenger service frequencies and additional cargo dedicated aircraft, as well as an unknown amount of temporarily passenger-converted cargo flights. Main routes from New York, which has been considered the epicenter of the Covid-19 in the US, present major shifts in mix to other large cities such as Chicago and Los Angeles.

COVID-19 has had a relatively lesser impact on the connectedness of the US domestic network compared to other domestic markets around the world, but most routes have still experienced a severe net decline in commercial flight frequencies. Whilst the CARES Act has extended a lifeline to many routes that could otherwise have been canceled, most routes are operating at far below their break-even point.

Analysis by Angus Reid-Kay, Sean Lee and Barbara Mejia of ICF

   Featured image © HA-KLS

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