Air travel demand is breaking records. Airline profits are not
What potential challenges might affect airline earnings in the third quarter?
Potential challenges that might affect airline earnings in the third quarter include weaker spending from coach-class clientele, the Paris Olympics' impact on some Europe bookings, possible changes in corporate travel demand, and airlines facing delays of new, more fuel-efficient aircraft from Airbus and Boeing. Additionally, some travelers have been opting for trips in late spring and early summer, raising questions about late-summer demand.
What factors are reducing airline profits despite high travel demand?
Higher payroll and other expenses, increased capacity, discounted fares in off-peak periods, delays in new aircraft deliveries, and engine groundings are reducing airline profits despite high travel demand2.
How have increased U.S. airline capacities affected airfares?
Increased U.S. airline capacities have led to more available seats for passengers, resulting in airlines discounting fares in off-peak periods to fill those seats2. This expansion has kept airfares in check and even led to a decrease in airfare prices, with average domestic airfare down 6% over the last year.