Pandemic Recovery Lags At Detroit, MSP And Philly Airports. Here’s How Delta And American Will Fix It.

Pandemic recovery remains the defining trend in the airline industry, but its impact at key U.S. hubs has been widely uneven.

Particularly slow traffic returns have occurred at two of Delta’s mid-continent hubs as well as at American’s primary transatlantic hub. California’s two key airports, major providers of transpacific fights, have also been slow to restore service.

In a recent report, Fitch Ratings said average airport traffic recovery across its airport portfolio ended 2022 at 92% of 2019 levels, but “It was not an across-the-board success story.” According to Fitch, “A slower return in hubbing activity led to secondary hubs such as Detroit, Minneapolis and Philadelphia ending the year at less than 80% of 2019 levels.”

Stats from the three airports show full-year passenger traffic declines between 2019 and 2022 of 31% at Philadelphia International Airport, 23% at Detroit and 21% at Minneapolis. Now, however, hub carriers Delta and American are building back their most depleted hubs.

Delta President Glen Hauenstein addressed the comeback of Detroit and Minneapolis on the carrier’s April 13^th earnings call while last month, Brian Znotins, American’s vice president of network and schedule planning, said the plan is to rebuild Philadelphia.

On the Delta call, JP Morgan analyst Jamie Baker raised the issue that Delta has “the most exposure to the industrial heartland.” He said, “The manufacturing sector may now be in a recession and that’s a part of the world that you have a decent amount of exposure to” and he asked about the flow through Detroit.

Hauenstein responded, “If you look at Minneapolis and Detroit, they’re actually ahead. They’re the least restored of our hubs right now. Particularly Detroit is one tick below the rest of the system. But you’ve also had rationalization in competing hubs in the region.” Hauenstein said Detroit relies largely on connecting traffic. As a result, “There’s opportunity as we continue to restore those networks to put more flow on the network,” particularly in Detroit.

“Our core hubs are less restored than our coastal gateways, and that’s one of the upsides I think we have for the rest of the year as we move through the year, and they’re producing incredible returns and incredibly strong demand sets,” Hauenstein said.

According to Cirium, an aviation analytics company, in June 2022 Delta’s daily Detroit departures stood at about 301. Its June Detroit daily departures declined from about 418 in 2019 to 131 2020 and then rebounded to 318 in June 2021,

In Minneapolis, Delta operations took a similar course. Cirium said June 2022 departures stood at 301, Cirium said. Delta’s daily Minneapolis June departures declined from about 405 in 2019 to 315 in 2020 and then fell back a bit to about 300 in 2022.

Both hubs reflect the pattern where Delta reacted to the pandemic with dramatic cutbacks at some hubs, particularly hubs with Asia service, and where all airlines cut back on regional aircraft service due to a shortage of regional pilots.

As for Philadelphia, Znotins addressed questions about its traffic decline during a March session with American employees.

“Philadelphia is still our primary European gateway, “ he said. Although American also flies transatlantic from New York Kennedy, Znotins said, that “JFK is built for the locals. We don’t have a lot of connectivity in JFK. We can’t serve the country to Europe with JFK flying. In Philadelphia, we can serve the country to Europe.”

During the pandemic, Znotins said, American prioritized flying at Charlotte, Dallas, Miami and Phoenix, airports with multiple connections to leisure markets in the South. But now, he said, “Philadelphia has been a bit smaller than we would like it to be”, leaving the city with “less feed opportunities for those European opportunities that are launching.”

The situation is not permanent, Znotins said. Philadelphia will be a major beneficiary when American takes deliveries of new extended range narrowbody Airbus A321 XLRs starting in the first quarter of 2024. “As we take these XLRs those are for Philadelphia,” Znotins said. “We’ll see a lot of those XLRs going to PHL, and we will add more widebodies there as well.”

On the Fitch Ratings email to reporters and others last week, the heading was “Some major hubs stumble as U.S. airport and toll road traffic nears full recover.” Fitch’s said its top airport gainer with a 133% traffic gain from 2019 was Myrtle Beach International Airport: next were El Paso and Boise. Among major airports, Charlotte, Dallas, Miami and Denver were top gainers, while Atlanta, Boston, O’Hare and Seattle were in the 80% to 90% recovery range “due to slower return in demand for international and business travel, and reduced hubbing activity.”

Besides Detroit, Minneapolis and Philadelphia, two key transpacific airports also showed declines. At San Francisco International Airport, traffic declined 27% during the pandemic, to 42.1 million passengers in 2022 from 57.3 million passengers in 2019, according to airport statistics. In 2020, SFO handled just 16.4 million passengers.

At Los Angeles International Airport, traffic declined 25% during the pandemic, to 66.0 million passengers in 2022 from 88.1 million in 2019. In 2020, LAX handled just 28.8 million passengers.

“International gateways in Los Angeles and San Francisco were the large airports with the least recovery, ending 2022 at below 75% of 2019 traffic levels, as gateways to Asia were negatively affected by China’s zero-COVID policy,” Fitch said. “With the lifting of China’s policy, we expect to see a rebound at these facilities in 2023.”