Passengers pass through Chicago O’Hare Airport on July 3, 2024.
Scott Olson | Getty Images
Record summer air travel demand hasn’t translated into record profits for U.S. airlines. Operators will have to respond to this disconnect when they report quarterly results this month.
Some airlines have forecast record demand, and in some cases, income. On Sunday, the Transportation Security Administration screened more than 3 million people, setting a single-day record.
but higher labor and other costs that have eaten into airline profits. To adapt to slowing demand growth and other challenges, some operators have Slowed down if not Stop recruiting Compare that to the recruiting boom during the post-pandemic rebuild.
And some airlines are facing delay Airbus launches new, more fuel-efficient planes boeing company At the same time, a Pratt & Whitney engine remember have grounded Dozens of jets.
However, American Airlines has increased capacity and has about 6% more seats in July than in July 2023, according to aviation data firm OAG. expansion is maintained Ticket checkedstocks in the sector have lagged the broader market.
this NYSE Arca Airline Index, The company, which tracks 16 U.S. airlines, has seen its shares fall nearly 19% this year, while S&P 500 Index An increase of more than 16%.
“Clear as mud”
Raymond James analyst Savanthi Syth said in a note on Friday that the situation for airlines in the third quarter was “clearly clear”, pointing to a number of headwinds such as There may be weakening spending by economy class customers, the impact of the Paris Olympics on some European bookings, and possible changes in business travel demand.
Additionally, some travelers are choosing to travel in late spring and early summer, which raises questions about late summer demand.
When airlines report quarterly results, investors will get a deeper look into the traditionally slower late summer and rest of the year, starting with Delta Airlines Thursday.
Analysts believe Delta Air Lines the bestthanks in large part to the airline’s success in marketing more expensive premium seats and lucrative deals with the airline American Express.
In April, Delta Air Lines, the most profitable U.S. airline, forecast second-quarter adjusted earnings of $2.20 to $2.50 per share, down from adjusted earnings of $2.68 per share a year earlier.
Delta Air Lines, its competitor United Airlinesreports next week, and Alaska Airlines It is the top choice of Wolfe Research airline analyst Scott Group, who said in a June 28 research report that compared with other airlines, these three airlines have less profit risk and better free cash flow.
Shares of Delta Air Lines and United Airlines are both up about 14% this year through July 5, particularly impressive performances in an industry that has seen much of its decline this year. Alaska shares fell approx. 2%.
Fares are cheaper
Airports are buzzing with activity this summer. But airlines have been expanding domestic and international flight schedules and driving down fares. According to data from consulting firm Airline/Aircraft Projects, U.S.-Europe capacity increased by nearly 8% in July compared with the same period last year, and the new routes are mainly targeted at leisure passengers.
Fare tracking company Hopper reported in June that the average summer fare for economy-class flights between the U.S. and Europe was $892, compared with $1,065 in summer 2023.
According to the latest inflation data in the United States, air ticket prices fell by nearly 6% year-on-year in May.
Downgrade forecast
Despite the increase in passenger numbers, some airlines admitted that sales were lower than expected due to more flights. American airlines May 28 Lowers second-quarter revenue and profit forecasts and announced the departure of its chief commercial officer after a sales strategy backfired.
“Domestic supply and demand imbalances have resulted in a weaker domestic pricing environment than we expected,” American Airlines CEO Robert Isom said the next day at a Bernstein industry conference. “There is more discount activity than a year ago. Now. , industry capacity is expected to decline in the second half of this year, which should help.”
Passengers at New York LaGuardia Airport
Leslie Josephs/CNBC
Southwest Airlines Cut it Second quarter forecast in late June, citing changing demand patterns. The Dallas-based airline is under pressure to quickly change its long-profitable business model, which has no seat assignments and one class of service, as big rivals such as United and Delta Air Lines tout premium cabins. Strong growth.
The airline is working on Defend activist investors Elliott Investment Management Nearly $2 billion stake disclosed June served at the airline and called for a change in leadership.
“We will adjust as customer needs change,” Southwest CEO Bob Jordan said on June 12 while discussing potential new revenue initiatives at an industry event hosted by Politico.
American Airlines and Southwest Airlines both report second-quarter results in late July.
make change
Some loss-making operators, e.g. JetBlue Airways and Frontier Airlinesare already making changes.
JetBlue has Cut unprofitable flights This year, we’re making sure planes equipped with our premium Mint business class, which costs more than four times the price of regular cabin fares, are flying on the right routes.
Meanwhile, Frontier Airlines and other discount airlines spirit airlines have Cancellation change fee For standard long-distance bus tickets and above, the following are larger, Moves of traditional operators During the epidemic. Two budget airlines announced in May that they would begin offering bundled fares that include seat assignments and other add-on fees they have charged in the past.
spirit, struggling with the consequences of a disaster judge’s decision The company, which blocked JetBlue’s takeover of the airline and is the airline most affected by the Pratt engine grounding, warned about 200 pilots last week that they could be affected. on vacation this year, according to the pilots union.
At Spirit’s annual shareholder meeting in June, CEO Ted Christie reject suggestion Spirit is considering filing for Chapter 11 bankruptcy protection, with more than $1 billion in debt due in September 2025.
