American Airlines cuts second-half growth plans | Wilnesh News

U.S. airlines are cutting capacity through the end of the year to cool an oversupplied domestic market, leading to lower fares and lower profits despite strong summer travel demand. For passengers, this could mean fares are about to rise.

Deutsche Bank said in a report on Sunday that American Airlines made “one of the largest weekly capacity cuts in the industry” last week, cutting planned fourth-quarter capacity by nearly 1%. Airlines currently expect flight numbers to increase by about 4% annually in the last three months of this year.

“While overall cuts are significant, we expect further flight reductions in the coming weeks as airlines are expected to continue to refine their schedules,” Deutsche Bank airlines analyst Michael Linenberg wrote in a note. surface.

U.S. airline executives note strong demand, but a flood of flights in the U.S. domestic market is forcing them to cancel growth plans, which could drive up fares. The latest U.S. inflation report earlier this month showed that air ticket prices fell 5.1% year-on-year in June, down 5.7% from May.

If travel demand continues to grow, reducing capacity could drive up fares for consumers and boost airline profits. As consumers have cut back on spending in other areas, having fares in the market that are profitable for airlines but acceptable to consumers is crucial for the industry.

Outlook for the third quarter delta and Unity Investors were disappointed earlier this month, but their chief executive said they expected capacity reductions across the U.S. industry to materialize in August, helping results. Southwest Airlines Unit revenue, a measure of how much revenue an airline brings in from the volume of flights it flies, is forecast to likely fall in the third quarter. The airline said last week it would eventually abandon its signature open-seat format and introduce seats with extra legroom to boost revenue.

American airlines It reported a 46% drop in second-quarter profit on Thursday and said it planned to scale back capacity growth in the coming months, after rising less than 1% in September from a year earlier.

“Excess capacity resulted in a higher level of discount activity in the quarter than we expected,” Chief Executive Robert Isom said on an earnings call last week. Overall, American plans to After growing by about 8% month-on-month, it achieved 3.5% growth in the second half of this year.

Low-cost and discount airlines have been more aggressive in cutting unprofitable routes and reducing capacity. Deutsche Bank said the airlines planned to shrink by 2.2% in the fourth quarter compared with the same period in 2023.

JetBlue AirwaysThis year, for example, the company eliminated loss-making routes and deployed aircraft to more popular city pairs. The airline is due to report results before the market opens on Tuesday.

spirit airlinesMeanwhile, airlines warned of larger-than-expected losses in the second quarter due to lower-than-expected revenue from non-ticket revenue, which includes fees such as checked bags and seat assignments.