Aug 21, 2020

Axios Navigate

By Joann Muller
Joann Muller

Happy Friday! Today we look at the challenges ahead for airlines and get a sneak peak at the hotly anticipated Ford Bronco.

If you have tips or comments, send me an email: joann@axios.com.

Smart Brevity count: 1,607 words, a 6-minute read.

1 big thing: New turbulence for airlines

Illustration: Sarah Grillo/Axios

The peak leisure travel season — such as it is — is almost over, and without conferences or events to woo business travelers this fall, the airline industry's modest recovery could quickly lose altitude.

Why it matters: Investors have been snapping up airlines as bargain stocks lately — encouraged, in part, by reports of potential progress toward a coronavirus vaccine that could boost depressed air travel.

Investors seem to be betting that furloughs and other deep cost cuts — and perhaps another round of federal aid — will put airlines in decent shape for a financial recovery when travel picks up again.

  • But a vaccine won't immediately end the pandemic.
  • Betting on travel "re-opening" stocks — like cruise lines, hotels and airlines, which would presumably thrive if COVID-19 were subdued — remains a risky play and ultimately depends on when the traveling public feels it is safe to fly and spend money again.

For the record: The airline industry was on its way to another year of record operating revenues in 2020 when COVID-19 shut everything down in mid-March.

  • Passenger volumes collapsed more than 90% in late March and early April, amid stay-at-home orders and international border closings.
  • Operating revenues plummeted an average of 86.5% in the second quarter, per Airlines for America.

By the numbers: According to the trade group's data:

  • As of mid-August, domestic passenger volumes are still down 70% from a year ago; international travel is down 88%.
  • The average domestic flight is 47% full, vs. 88% a year earlier.
  • About 717,000 people passed through TSA checkpoints per day in mid-August, vs. 95,000 in mid-April and more than 2 million per day pre-COVID.

Quarantine restrictions have had a big effect on travel to some regions: Flights to New York and New Jersey have dropped the most, because of New York's clampdown on travelers from states with high infection rates. Travel to Hawaii, which has similar restrictions, is almost non-existent, with passenger counts down 94% year over year.

Almost all of those who are flying are leisure travelers — people visiting friends and family, or taking domestic vacations after being cooped up all spring.

Bank of America analysts are sounding a note of caution: "We are only a few weeks away from moving out of peak leisure travel season, and into a more business-heavy period. With corporate volumes not moving meaningfully off of trough levels, we believe there could be risk to domestic volumes as we move into September."

The bottom line: Air travel took three years to recover from 9/11, and more than seven years to bounce back from the global financial crisis, notes Airlines for America. We can expect a similarly slow recovery this time.

Read the full story.

2. Delta's employee testing strategy

Illustration: Sarah Grillo/Axios

A widely available coronavirus vaccine would go a long way toward rebuilding public confidence in air travel, but until it arrives, Delta Air Lines believes widespread, proactive COVID-19 testing for employees will help win passengers' trust.

What's happening: In partnership with the Mayo Clinic and Quest Diagnostics, Delta plans to test every one of its 75,000 employees for both active COVID-19 and antibodies by the end of the month.

  • It will then use those results as a baseline to help develop a re-testing strategy based on tailored risk assessments.
  • More than 60% of Delta employees have been tested so far this month.
  • Delta and CVS Health said this week they will accelerate testing of remaining flight crews with a 15-minute test administered in crew lounges at Delta hub airports.

Why it matters: Testing is another precaution by Delta — in addition to checking symptoms, wearing masks, cleaning planes frequently and limiting flight capacity to 60% — to try to woo back passengers during the pandemic.

  • Other airlines are doing similar things, but it's believed Delta is the only one attempting to test every employee.
  • Testing is "really one of our best tools right now in keeping workforces safe," the Mayo Clinic's William Morice tells Axios.
  • By testing everyone, Delta and Mayo hope to identify broader trends that might alert them to higher-risk workplaces or routes, for example.
  • Then they can respond with the appropriate measures to address those particular risks.

What they're saying: "Any survey you look at, people are still concerned whether it's safe to travel," Delta CEO Ed Bastian told "Axios on HBO" in June. "And it's our job to ensure the traveling public that indeed it is safe."

The bottom line: While most consumers are still wary of travel, those who have traveled recently are far more confident to fly again, according to a survey by PwC.

Read the full story.

Go deeper: Plane cabins could change dramatically because of the pandemic. Here's how. (Washington Post)

3. Showdown over gig drivers in California

Illustration: Eniola Odetunde/Axios

The gig economy model powering a number of key tech giants threatens to break down in California, in a battle that may spill out across the country over whether gig workers should be considered employees, writes Axios' Kia Kokalitcheva.

Why it matters: Treating gig companies' workers as employees would guarantee them benefits and other rights they don't necessarily get as independent contractors. But the prospect presents an existential threat to the firms' business models.

What's happening: Uber and Lyft on Thursday backed off threats to suspend ride-hailing services across California after an appeals court stayed an injunction ordering them to reclassify their drivers in the state as employees.

Yes, but: It's a temporary victory for the companies. The broader court battle still looms, and California is sure to keep the pressure up.

The big picture: Gig economy companies view themselves as two-sided markets, connecting customers looking for, for instance, a ride or overnight stay with people selling that service. Labor groups and Democratic officials see them as conventional employers who have figured out a business model that lets them dodge the obligations and liabilities of employing people.

California is the battleground for those two diverging camps, as gig companies in the state look to avoid complying with the new law and increasingly end up in court. It's not just Uber and Lyft; DoorDash and Instacart have also been sued.

What’s next: Uber, Lyft and their peers are headed to the California ballot box in November, pushing Proposition 22, which would let them keep classifying workers as independent contractors while, for the first time, providing them a limited set of benefits.

Read Kia's full story.

4. The tech that car buyers want

Illustration: Eniola Odetunde/Axios

Consumers want more camera views in their vehicles, but don't care for gesture controls, according to the J.D. Power 2020 U.S. Tech Experience Index (TXI) Study.

Why it matters: New technology can be a big factor in deciding which vehicle to buy, but high-tech features need to be intuitive and reliable — or consumers will get frustrated and feel they've wasted their money, the study found.

Key takeaways:

Car owners like an extra set of eyes: Rear-view mirror cameras are rated highest, followed by cameras that let you "see through" trailers or provide a ground view of blind spots.

Gesture controls get the finger: Flicking your hand at the controls rather than touching knobs or screens is prone to problems. The majority (61%) of owners use the technology less than half of the time they drive.

Driver-assist functions are suspect: Most drivers don't trust technologies that control acceleration, braking and steering — the building blocks for more automated driving — suggesting carmakers have work to do.

5. Driving the conversation

Electric bikes see a pandemic-driven spike (Ashley Gold — Axios)

  • Why it matters: E-bike manufacturers are racing to keep up with the newfound demand as people, wary of crowded public transit and facing less congestion from commuting cars, adopt new ways of getting around.

A move for driverless mass transit hits speed bumps (David Zipper — Wired)

  • The big picture: Autonomous shuttle pilots are becoming common in many cities. But technical limitations and hostility from labor unions could prevent them from replacing buses and subways.

GM says over 40% of new China launches in next five years will be EVs (Norihiko Shirouzu — Reuters)

  • Why it matters: With an EV push, GM is trying to stem a big sales slide after more than two decades of growth in a country that contributes nearly a fifth of its profit.
6. What I'm driving

Ford Bronco 2-door, 4-door and smaller Bronco Sport; coming soon. Photo: Courtesy of Ford.

Last week I got to ride shotgun in the hotly anticipated 2021 Ford Bronco at a thrilling off-road vehicle playground in Michigan.

Why it matters: Rarely has a new model generated the kind of buzz the new Bronco has seen. So when Ford offered a handful of journalists a chance to hop in the passenger seats of some early prototypes with the engineers who designed them, of course I jumped at the opportunity, even if I couldn't drive.

The big picture: The original Ford Bronco SUV was introduced in 1966 — inspired by the military vehicles Ford built during World War II — and later built a cult following for off-road racing after it won the brutal Baja 1000 in 1969.

  • Fun fact: There are two famous white Broncos. One carrying O.J. Simpson was chased by Los Angeles police in 1994. The other carried the Pope on his first visit to the U.S. in 1979.
  • Ford discontinued the Bronco in 1996 as vehicles like the Ford Explorer and Expedition took its place.

Now the Bronco is back, but as an entire family of SUVs, including two- and four-door Broncos plus a smaller Bronco Sport, all available with a dizzying array of personalized accessories.

I rode in two different Broncos: the two-door "Outer Banks" version, outfitted with the extreme off-roading "Sasquatch" package, and the Bronco Sport with the higher-end "Badlands" trim.

  • Each comes with up to seven driving modes: Normal, Eco, Sport, Slippery, Sand, Baja, Mud/Ruts and Rock Crawl.
  • A variety of power train options, including a seven-speed manual transmission, are available.
  • There's a ton of available technology, including cameras that can see past blind spots, over hills or around tight corners, and a trail-mapping system that lets users select one of hundreds of curated trail maps and then record their adventures to share with others.

Key takeaway: Jeep, the leading rugged SUV brand, ought to be worried. Ford is coming for you.

Read more about the Bronco.

Joann Muller