Airlines Are Thriving as People Keep Traveling

Summer travel is off to a strong start and shows few signs of slowing down. And airline executives say they are doing everything they can to respond, including dealing with severe weather and air and ground congestion.

The three largest US airlines, American Airlines, Delta Air Lines and United Airlines, set quarterly revenue records in the three months to June. Profits more than doubled from the same period last year, prompting the three companies to raise their profit forecasts for this year.

“We are in a world where demand is still very strong,” American Airlines Chief Commercial Officer Vasu Raja told reporters and investors on a conference call on Thursday.

The strong quarterly results underscore the sustainability of the travel industry’s recovery from the pandemic. June was slightly busier than the same month in 2019, and July seems to be on track with traffic comparable to pre-pandemic. The Transportation Security Administration tested about 2.9 million people on the Friday before Independence Day weekend. Largest volume ever processed in one day.

But the recent economic recovery has been marred by problems such as delays and cancellations across the country.

Airlines and air traffic control systems have struggled over the past two years to navigate bad weather, technical problems, staffing shortages and other disruptions that seem to have hit Southwest Airlines for several days in late December. contributed to a massive meltdown. Delays and cancellations often cascade, disrupting air travel for days and leaving many people stranded far from their destinations.

Weather has caused nearly 70% of air delays so far this year, compared with just under 61% during the same period last year. according to federal data. Heavy traffic also causes delays.

United Airlines has recently struggled to overcome the disruptions that preceded July 4, initially due to bad weather and air traffic control shortages affecting its hub Newark Liberty International Airport. Other airlines in the region, however, did not suffer as much. In the week leading up to the holiday weekend, airlines canceled about 17% of all flights and delayed more than 51%, according to aviation data provider FlightAware.

Overall, about 1.8% of planned flights were canceled in the two months to Tuesday, compared with 1.9% in the same period in 2019, according to FlightAware data. But many more have fallen behind, from about 19% in the same period in 2019 to about 25% in the past two months.

Airlines say they have taken steps to prevent disruptions, including spending on technology, hiring and training. Following recent struggles, United announced fewer peak flights, more gates and other changes.

“We are working harder than ever to mitigate the impact of weather, congestion and other infrastructure constraints in Newark,” said Scott Kirby, CEO of United Airlines.

Domestic travel has been booming for quite some time, but airlines say more Americans are traveling abroad.

American Airlines said passenger revenue from international travel increased nearly 22% year-over-year, and Delta Air Lines said it set a record for international revenue in the second quarter. United Airlines announced this week that it will add flights to Asia in October.

Driven by high demand, the average cost of a round-trip international ticket is about $971, nearly 24% higher than the price so far in 2019, according to travel app Hopper.

These fare increases are good for airlines, and American Airlines, Delta Air Lines and United Airlines expect the boom to continue. Delta Air Lines, for example, now expects revenue to increase by at least 17% this year compared to last year.

Airline ticket prices skyrocketed a year ago as airlines struggled to meet demand and Russia’s invasion of Ukraine drove jet fuel prices up. But fuel prices fell again. American Airlines said fuel spending in the second quarter fell by a third from a year ago, saving about $1.3 billion.

As a result, average domestic round-trip ticket prices fell more than 13% on Thursday compared to the same day last year, and more than 9% lower than in 2019, Hopper said. Freight rates in June were significantly lower than in the same month of the previous year, contributing to a decline in overall inflation.

Labor costs are rising even though fuel prices are falling. American Airlines said spending on salaries, wages and benefits increased about 12% in the second quarter from a year ago. The company is negotiating a new contract with the pilot union, which is expected to bring significant pay increases.

Last weekend, United Airlines pilots agreed to a $10 billion deal with the company that would increase their salaries by up to 40% over four years, and American Airlines said the increase would be commensurate. Delta Air Lines pilots approved a deal in March that would raise wages by 34% through 2026.

United and American are also negotiating contracts with unions representing flight attendants.

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