Cash-strapped airlines must gamble on how many travelers will book last minute Thanksgiving flights — and they've got no room for error

• The Thanksgiving weekend is the most important time of the year for US airlines.
• However, bookings for November are down as much as 88% compared to this time last year, data from airline analysis firm OAG show.
• Airlines are hoping for a surge in last-minute bookings, keeping with trends during the pandemic, but the industry remains in a tailspin as travel demand fails to sufficiently recover.

Fresh off a weak summer travel season during which Americans largely hunkered at home or took to the roads, America's airlines face a new looming disaster: a soft Thanksgiving and holiday travel season.

New analyses by airline analytics firm OAG, along with data provided by Cirium and examined by Business Insider, show that the first holiday travel season of the COVID-19 pandemic may force carriers to make costly decisions as they gamble on whether demand will grow closer to the Thanksgiving weekend.

Apart from modest spikes in demand during the summer, particularly around Memorial Day, the Fourth of July, and Labor Day, demand has settled at a "new normal," roughly 30% of 2019's levels. That's partly because business travel is barely existent right now, while leisure travel remains minimal.

Although carriers hope for stronger demand over the holidays as Americans visit friends and relatives, there are so far no signs of that materializing. American Airlines and United Airlines currently see 25% as many November bookings as they did at this time in 2019, OAG found. Delta Air Lines was looking at just 12% of last year's bookings as of late-September.

That could spell disaster for struggling US airlines, according to R.W. Mann, an airline industry analyst and consultant.

"The Thanksgiving holidays are typically a peak traffic and profit period. At some airlines, in some years, the single highest profit days," he said. "The Christmas-New Year holiday week can be relatively high volume, depending on the day of week, but not as strong as Thanksgiving days."

Worsening the potential pain, many customers could book travel using vouchers: US carriers owe more than $10 billion to customers over flights cancelled early in the pandemic. Every voucher redeemed is a booking for which the airline earn no new cash (although it does remove a liability from the airlines' balance sheets).

Moreover, leisure bookings are typically cheaper than business fares, meaning airlines will make a lower yield on holiday travel than they would normally hope. Even though holiday bookings are usually leisure-heavy, they're still supplemented by business travelers — people heading home from meetings or site visits, for instance. Since price-conscious holiday travelers book up all the low fares, airlines could make even higher yields than normal from those corporate travelers heading home.

This is particularly bleak as major US airlines try to slow their daily cash burn as the pandemic continues to decimate revenue. Airlines are aiming to reach a daily cash burn rate of zero by the end of the year, after losing as much as $100 million a day during the height of pandemic lockdowns.

Of course, some safety and ethical concerns come with encouraging travel, as the US tries to keep the pandemic under control. While the CDC does not specifically recommend avoiding travel, it advises that "staying home is the best way to protect yourself and others from COVID-19."

One glimmer of hope remains for the struggling carriers: Lately, passengers have been booking flights closer to departure than ever before, waiting until they know they'll be able to make the trip — and avoid localized virus outbreaks or stringent quarantine restrictions — before booking.

Delta, for instance, is seeing more bookings within seven days of travel than it ever has in the past, CEO Ed Bastian said last month, speaking to investors at a webinar hosted by Neuberger Berman.

"People are deciding to travel short term because they're not quite ready to make longterm plans," Bastian said.

Scheduling and rescheduling as the pandemic crushes travel demand

A last-minute surge, however, could present its own challenges.

In normal times, airlines tend to publish their flight schedules about 11 months in advance, tweaking specific flights or routes as they see how demand actually manifests.

This has largely continued during the pandemic, with airlines publishing complete advance schedules.

However, airlines are now "republishing" their schedules somewhere between 3-6 weeks ahead of time, slashing routes and frequencies based the latest demand forecasts. After these revisions, airlines have generally flown roughly 40-50% of their 2019 capacity.

Delta was the first of the big three US airlines to adjust its November schedule, according to data obtained via Cirium. The airline has scheduled 93,233 domestic flights, about 5,400 more than it will fly in October, but down from 139,771 in November 2019. (Those include flights sold by Delta and operated under its brand by regional carriers.)

For November, that's a 33% year-over-year reduction, compared to a 42% year-over-year reduction in October, suggesting that the airline is predicting a last-minute surge in bookings.

American's schedule is down 44% over November 2019, while United's is down 50%.

Predicting holiday demand is a unique challenge during unprecedented times.

Planning the schedule for Thanksgiving will be tricky, though. Airlines gambling on a late booking surge must decide whether to take planes out of storage, and schedule crews and layovers, well before those bookings would materialize.

Airlines use a variety of data points to predict actual demand, including website visits and searches.

"We've been adjusting our schedules 30 to 45 days out of every month, which enables us to accurately match supply to customer demand much closer in," Ankit Gupta, United's head of domestic network and route planning, told Business Insider in a statement.

But the scale of potential last minute Thanksgiving travel leaves little room for error. If an airline overestimates demand, it could end up with half-full planes criss-crossing the US, operating at a loss as airlines try to slow their daily cash burn. If it underestimates, it risks upsetting customers who can't find flights home for the holidays, and losing out on potential revenue. Not to mention the potential delays and crowds at the airport if flights end up severely overbooked at the last minute.

Whether that surge materializes also depends on perception of the pandemic itself at the time. People have largely avoided flying in order to avoid having to follow quarantine requirements set by some states, as well as anxiety over catching the virus on a plane, in an airport, or during transit — even though the risk of transmission on the plane itself appears to be fairly low.

The good news for airlines is that they have adapted quickly to the new pandemic reality. Plans which previously needed to be cemented weeks to months in advance — like staffing logistics and equipment allocation — can now be adjusted fairly last-minute. Carriers have learned how to build remarkable flexibility into their operations.

"We've been adjusting flight schedules closer in, as well, zero to 10 days from departure," Gupta said, "by looking at customer load factors and switching to larger aircraft as needed."

Even as United moves to furlough about 13,000 workers and keeps some of its fleet in storage, it will keep extra crews and airplanes on reserve in case of unexpected last-minute demand.

"We're able to add flights to our schedule to accommodate additional customer demand," Gupta said. "In fact, we have been keeping additional aircraft in our schedule on standby for exactly that purpose."

The extra flights can be added in the same zero to 10 day range, he added.