Passengers go through O’Hare airport in Chicago, July 3, 2024.
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Record summer air travel demand is not translating to record U.S. airline profits. Carriers may have to reply for that disconnect after they report quarterly results this month.
Some airlines have forecast record demand, and in some cases, revenue. On Sunday, the Transportation Security Administration screened greater than 3 million people, a one-day record.
But higher labor and other costs have eaten into airlines’ bottom lines. To adapt to slower demand growth and other challenges, some carriers have slowed if not halted hiring compared with hiring sprees after they rebuilt after the pandemic.
And a few airlines are facing delays of latest, more fuel-efficient aircraft from Airbus and Boeing at the identical time that a Pratt & Whitney engine recall has grounded dozens of jets.
Yet U.S. airlines have increased capability, flying about 6% more seats in July than they did in July 2023, in response to aviation data firm OAG. The expansion is keeping airfare in check, and stocks within the sector have fallen behind the broader market.
The NYSE Arca Airline Index, which tracks 16 mostly U.S. airlines, is down almost 19% this 12 months, while the S&P 500 has advanced greater than 16%.
‘Clear as mud’
What the third quarter will seem like for airlines is “clear as mud,” Raymond James analyst Savanthi Syth said in a note Friday, citing headwinds resembling potentially weaker spending from coach-class clientele, the Paris Olympics’ impact on some Europe bookings, and possible changes in corporate travel demand.
Also, some travelers have been choosing trips in late spring and early summer, raising questions on late-summer demand.
Investors will get more insight into the traditionally slower tail end of summer and the remainder of the 12 months when airlines report quarterly results, starting with Delta Air Lines on Thursday.
Analysts consider Delta the very best of the bunch, thanks largely to the airline’s success in marketing costlier, premium seats and its lucrative cope with American Express.
In April, Delta, essentially the most profitable U.S. airline, forecast quarterly adjusted earnings of $2.20 to $2.50 a share for the second quarter, which could be down from the adjusted $2.68 a share it brought in a 12 months earlier.
Delta, its rival United Airlines, which reports the next week, and Alaska Airlines are top picks for Wolfe Research airline analyst Scott Group, who said in a June 28 research note that the three have less earnings risk and higher free money flow than other carriers.
Shares of Delta and United are each up about 14% this 12 months through July 5, the standouts in a sector that is generally down this 12 months. Alaska shares are down about 2%.

Cheaper fares
Airports are bustling this summer. But airlines have been expanding their schedules, each domestically and internationally, pushing down fares. U.S.-Europe capability for July is up nearly 8% from a 12 months ago, in response to consulting firm Airline/Aircraft Projects, with recent routes largely targeting leisure travelers.
Fare-tracking company Hopper reported in June that summer flights between the U.S. and Europe in coach were going for $892 on average, compared with $1,065 for summer 2023.
Airfare was down nearly 6% in May from a 12 months earlier, in response to the newest U.S. inflation data.
Lowered forecasts
Despite higher numbers of passengers, some carriers have admitted weaker sales than expected due to increased flights. American Airlines on May 28 cut its second-quarter revenue and profit forecasts and announced its chief industrial officer was leaving after a sales strategy backfired.
“The domestic supply and demand imbalance has led to a weaker domestic pricing environment than we had forecast,” American Airlines CEO Robert Isom said at a Bernstein industry conference the following day. “There’s more discounting activity than we saw a 12 months ago. Now, industry capability is anticipated to come back down within the second half of the 12 months, and that ought to help.”
Travelers at Latest York’s LaGuardia Airport
Leslie Josephs/CNBC
Southwest Airlines cut its second-quarter forecast in late June, citing shifting 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 resembling United and Delta tout strong growth from premium cabins.
The airline is attempting to fend off activist investor Elliott Investment Management, which disclosed a virtually $2 billion stake within the carrier in June and called for a leadership change.
“We are going to adapt as our customers’ needs adapt,” Southwest CEO Bob Jordan said at an industry event hosted by Politico on June 12, discussing potential recent revenue initiatives.
Each American and Southwest report second-quarter results toward the tip of July.
Making changes
Some money-losing carriers, resembling JetBlue Airways and Frontier Airlines, are already making changes.
JetBlue has been cutting unprofitable flights this 12 months and ensuring that planes outfitted with its high-end Mint business cabin, where tickets can go for greater than 4 times a coach fare, is on the suitable routes.
Meanwhile Frontier Airlines and fellow discounter Spirit Airlines have done away with change fees for traditional coach tickets and above, following larger, legacy carriers’ move through the pandemic. Each budget airlines announced in May that they may start offering bundled fares to incorporate seat assignments and other add-ons that they used to charge for.
Spirit, which is scuffling with the fallout from a judge’s ruling that blocked JetBlue from buying the airline, and is essentially the most affected by the Pratt engine grounding, last week warned some 200 pilots they might be furloughed this 12 months, in response to the pilots union.
At Spirit’s annual shareholder meeting in June, CEO Ted Christie brushed off suggestions that Spirit is considering filing for Chapter 11 bankruptcy protection, with a greater than $1 billion debt payment due in September 2025.
