PHL’s leisure flights are rebounding, but business and international will take longer to recover

At Philadelphia International Airport, 2020 was 1986 all over again. That’s the last time passenger levels were so low. Last year, just 11.9 million travelers came through PHL as the pandemic dramatically altered air travel.

Compared with 2019′s 33 million passengers, that was a 64% drop.

Leisure travel from PHL to such places as Florida is returning, but low demand for business and international flights has airport officials planning for a three- to five-year recovery.

And although the airport has won stimulus funding from the federal government, it continues to face the prospect of “multi-million-dollar deficits” this year and next, CEO Chellie Cameron testified at a City Council committee hearing this week.

“Since March of 2020, our financial situation has become dire,” Cameron said at the Monday hearing on an airport proposal to trim staff by offering early retirements.

About 199 city airport employees would be eligible under the proposal, Cameron said in an interview. That’s about a quarter of the city’s division of aviation’s roughly 800-member staff.

“I didn’t want to lay our people off if we could avoid it,” Cameron said. Under the proposal, employees within five years of retirement age could retire without taking a financial hit. Current rules dictate that “if you go early, before you hit the minimum age, you take a pretty significant penalty on your retirement,” she said.

The airport relies on revenue tied to passenger traffic, not local tax dollars, to fund operations. In PHL’s fiscal year 2020, which ended June 30, a few months into pandemic lockdowns, operating revenue fell to $295.4 million, down from $391.1 million in 2019.

As of February, PHL officials projected a $33.9 million deficit for fiscal year 2021, and an $11.4 million deficit for 2022. A spokesperson said the estimates may fluctuate.

Three waves of stimulus funding have cushioned some of the losses from diminished travel. PHL has received about $260 million in federal relief, including $115 million from the American Rescue Plan signed into law this month. Accepting the funding also means the airport must retain 90% of its employees through the end of September, though voluntary separations and retirements are allowed.

City employees make up just a portion of the total workforce at the airport. Across companies and organizations that employ people at PHL, personnel fell more than 20% last year, from 21,000 to 16,000.

More flights are returning to the airport, and more people have been flying during spring break. “A lot of leisure travel is starting to happen, people are starting to make plans as they get vaccinated,” Cameron told members of City Council’s committee on transportation and public utilities. “But we are not seeing business travel come back in any kind of meaningful way.”

Before the pandemic, business travel made up about 45% to 50% of PHL’s overall traffic, Cameron said. Recent traveler surveys show that figure is now closer to 10%. “We feel that’s why our recovery is going to be a bit of time,” she said.

American Airlines is Philadelphia’s dominant airline. Compared with the company’s other hub airports, PHL “over-indexed” for business travel and transatlantic travel, said Brian Znotins, American’s vice president of network planning. Those two travel segments “have been hurting the most through this crisis,” he said.

“Philadelphia, obviously, is a pretty important hub for us,” Znotins said. “We have used it as our primary transatlantic gateway in the past, and it will continue to be that in the future. Unfortunately, right now, that means it’s in a bit of a hibernation. Transatlantic travel is among the least-demand, because of country closures and COVID risk.”

The airline continues to fly internationally to destinations in Mexico and the Caribbean from PHL. American’s flights from Philadelphia to London and Dublin will both restart March 27, the company said.

Lower demand for European travel also hurts connecting flights within the U.S. that typically funnel passengers through Philadelphia before they go abroad.

Looking at its summer schedule in PHL, American is planning on about 300 departures a day, give or take 10 or 20 departures, Znotins said. Compared with 2019 “on a seats basis, that’s about a third smaller than we would normally be,” he said.

American continues to see strong demand for Philadelphians booking trips to Florida. Flights to St. Thomas in May are popular, too, Znotins said.

The airline has added routes to destinations such as Asheville, N.C., starting in April, and Bozeman, Mont.; Salt Lake City, Utah; and Traverse City, Mich., all starting in June.

PHL and airlines were discussing a new lease agreement last year when the pandemic struck, and both sides ultimately agreed to extend two one-year options on the current lease, lasting until June 2022. Negotiations on a new lease will start later this year, Cameron said. “We’re really going to just try and wrap our arms around what this new normal is.”