CHICAGO - It should be the best of times for U.S. airlines with a travel boom still going strong, but investors are nervous demand may soften as the economy falters, making it harder to protect profits from soaring costs.
Strong demand from travelers has so far allowed carriers to mitigate inflationary pressure with higher fares. While both United and Delta said travel demand is holding up, double-digit declines in airfares year-over-year suggest airline pricing power has peaked. "Travel remains a top purchase priority and our core customer base is in a healthy financial position," Delta CEO Ed Bastian said last week.
Similarly, United projects its average fuel bill will increase by 11% in the December quarter from a quarter ago.New Chief Financial Officer Michael Leskinen told investors on Wednesday the company's non-fuel operating costs in the fourth quarter would rise by about 1.5 percentage points if its flights to Tel Aviv remain suspended through the year.
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