CEO chat: New England's Cape Air finds strength in Caribbean, Montana during COVID crisis

Want to fly in the U.S. Virgin Islands? Cape Air has a flight — many, actually — but you may have a tougher time than usual in snagging a seat on the 25-minute run between St. Thomas (STT) and St. Croix (STX). That's because that route is now the busiest in Cape Air's system, a regional carrier best known for its flights in New England and the Northeast.

And it's not just the Caribbean. The Hyannis, Massachusetts-based regional airline's network in Montana's "Big Sky Country" is another bright spot, with Cape Air's five flights from Billings (BIL) currently outperforming many in the carrier's traditional strongholds.

This is a strange twist of fate for Cape Air. Cape Cod and the islands of Martha's Vineyard (MVY) and Nantucket (ACK) have been its core market since flights began in 1989. Cape Air is such an iconic company in the region that the airline's role was immortalized when one of its Cessna props appeared in the opening sequence of the popular 1990s sitcom "Wings."

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Cape Air, like every other air carrier, is navigating the uncharted territories of the coronavirus pandemic. The crisis temporarily put a halt to much of global air travel and airline are only now beginning to emerge.

"We’re starting to see a little bit of movement but the Northeast is going to be far behind Montana and the Caribbean in ticket revenue," Cape Air president Linda Markham told TPG in an interview on Wednesday.

The airline has built a business flying nine-seat prop planes on short hops between hubs like Boston Logan (BOS) and smaller destinations. Its fleet of Cessna 402s and, flying since February, Tecnam P2012 Travellers offer travelers convenience and a unique experience with impressive views of the land — or sea — below.

Related: Onboard Cape Air’s all-new Tecnam Traveller to Nantucket

The carrier saw revenues fall 95% during the depths of the crisis in April and May. Passenger numbers collapsed with Cape Air carrying just 26 passengers on flights out of Martha's Vineyard for the entire month of April, the Martha's Vineyard Times reported.

The Martha's Vineyard numbers are equivalent to one passenger on just a quarter of the 100 flights Cape Air operated from the airport that month, according to Cirium schedules.

Much of the recovery in Cape Air's core network is dependent on outside forces. Massachusetts just entered its second reopening phase on June 8. That includes opening restaurants with outdoor dining, hotels and historic sites — all key to welcoming visitors back to Cape Cod and the islands this summer.

Related: A state-by-state guide to coronavirus reopening

Another factor is when other airlines resume flights. Cape Air benefits from American Airlines, Delta Air Lines, JetBlue Airways and United Airlines' service suspensions to some of its bread-and-butter destinations, founder and CEO Dan Wolf during the interviews said. The longer these suspensions, or reduced services last, the more traffic the regional can potentially pick up until the bigger players return.

American will resume service to Martha's Vineyard and Nantucket on June 19, Cirium schedules show. Delta and JetBlue will resume flights to the islands on June 26 and July 1, respectively, and United to Nantucket on June 20. However, all four carriers will operate greatly reduced schedules to the islands compared to last year through July. August schedules are still pending.

Cape Air is also a partner of American, JetBlue and United. Travelers can receive frequent flyer miles in each airline's program on Cape Air flights that are booked in conjunction with an American, JetBlue or United flight.

Related: What it is like flying on Cape Air

Business at Cape Air, as at other airlines, is on the upswing. Bookings that were down about 75% to 80% a week ago and now down just 45% compared to 2019 on a moving seven-day average, Wolf said during the interview. The airline also received payroll assistance funds from the federal government's coronavirus aid package, or CARES Act, that has helped bolster its balance sheet.

“I think it’s going to be a pretty good recovery to where we’re down, maybe, 40%" before the recovery plateaus, he said. "What’s really unclear, and that depends on what happens with COVID, a vaccine and politics, is what happens after that?”

Cape Air is prepared for business to be down 50% — or more — by Labor Day and remain down through the end of the year. However, it is prepared for a worst-case scenario that would require "some restructuring," said Wolf, adding that he does not expect this to be necessary.

Wolf expects Cape Air's business to recover, or a return to 2019 levels, in less than two years.

Related: Could Trans States Airlines closure buy time for other US regionals?

Regional airlines face an uncertain plight during the pandemic. Wall Street analysts view ones flying under mainline brands like" American Eagle" or "Delta Connection" — Republic Airlines and SkyWest Airlines, for example — as relatively stable since their contracts mandate a steady revenue stream. Independent regionals, like Cape Air and RavnAir in Alaska, lack these revenue guarantees while providing the only air service available to many small communities.

Faye Malarkey Black, president and CEO of the Regional Airlines Association (RAA), called the crisis an "existential threat" to regional airlines in Senate testimony in May.

The pandemic has already taken three regional carriers. Compass Airlines and Trans States Airlines closed their doors under accelerated timelines because of the crisis, and RavnAir entered bankruptcy and shut down for what it hopes will be a brief period in April. None of the airlines were able to secure CARES Act assistance before their closures.

Related: Which US airlines are blocking middle seats, requiring masks?

Cape Air is doing its part to woo back customers. It is disinfecting all of its planes before every flight and requiring all travelers and crew members to wear masks onboard. Masks are provided free of charge to passengers who do not have their own.

In addition, the cabin air on all of Cape Air's propeller planes is fresh from outside and not recirculated.

The airline is not, however, blocking seats or capping bookings on its flights that can only seat up to nine passengers to begin with.

“Obviously on a nine-seater plane it’s tough to social distance, that’s where the masks and the disinfecting really comes into play," says Markham.

Related: How a Cape Air prop made the ‘water jump’ from Europe to the U.S.

One silver lining of the crisis is Cape Air's introduction of the Tecnam Traveller. Low traveler numbers have given its pilots and ground crews more time to familiarize themselves with the the new aircraft, said Wolf.

The airline designed the plane — the first new aircraft in its history — in partnership with Italian planemaker Tecnam. The nine-seat prop features amenities like cupholders, USB outlets and even under-seat storage for carry-on bags that were absent in the Cessnas. In addition, with the wings mounted atop the fuselage, the views are even better than on the Cessnas.

Cape Air has 11 Travellers in its fleet, though only nine are in the U.S. while two are expected to make the water jump from Italy to Cape Cod shortly. It is on track to operate 20 of the planes by the end of the year.

Related: Air travel won’t return to pre-coronvirus levels until 2023, IATA predicts

Cape Air is looking for growth opportunities as the industry comes out of the crisis. The airline's nine-seat props could fill gaps in markets where major airlines shrink, for example to destinations that lose nonstop service from Boston or New York John F. Kennedy (JFK), said Wolf.

Executives at American, Delta, JetBlue and United have all repeatedly warned staff and investors that they will be smaller on the other side of COVID-19. Many cuts likely after CARES Act employee and air service protections sunset on Oct. 1.

In addition, Cape Air may open a new hub in Pittsburgh (PIT). The airline is seeking Department of Transportation contracts to serve Altoona (AOO) and DuBois (DUJ) in Pennsylvania, and Morgantown (MGW) in West Virginia from the airport. The operation would complement its existing Midwestern base in St. Louis (STL).

Related: Cape Air Adds Year-Round Connections to New York JFK