Watch onCHICAGO - 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.
A struggle to get control of operating costs has also called into question rival Delta Air Lines' goal of generating profit of over $7 per share next year, with some analysts now calling the target aspirational. That is a reason why the airline's shares are down 10% this month even after it posted stronger-than-expected quarterly earnings.
But that's easier said than done as analysts say a depletion of pandemic savings as well as high interest rates have crimped consumers' tolerance for high fares. "Travel remains a top purchase priority and our core customer base is in a healthy financial position," Delta CEO Ed Bastian said last week.
Rising fuel prices are estimated to inflate Delta's costs by $400 million in the second half of the year. The airline has trimmed its profit outlook for 2023 to a range of $6.00 to $6.25 a share from $6 to $7 per share estimated in July.