A passenger walks past a Delta Airlines 747 aircraft in McNamara Terminal at Detroit Metropolitan Wayne County Airport in Romulus, Mich. on Jan. 21, 2010.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. Airlines are likely to see “a more dramatic negative effect” than in the past if there is any downturn in demand because their cost of doing business has gone up materially, Mulberry said.
United, which has not forecast profit for 2024, on Tuesday similarly said travel demand remains “strong and steady.” 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.