Record summer travel usually boosts summer earnings for airlines as tourists travel around the world but as we progress further into 2024 the expected boost has not hit stock prices. While there are plenty of people traveling airlines are being tightened by increasing costs and decreasing pricing power. Recently United, Delta, Alaska Airlines, and Ryanair have posted disappointing second quarters and American and Southwest Airlines are supposed to follow suit when they report earnings this week. Airline passenger traffic in the United States is up at all time highs at an average of 2.46 million passengers per day which is a 6% increase from last year. Alaska’s CFO Shane Tackett said, “It was just that airlines were hoping that it (demand) was going to be even stronger.”
In Europe a similar trend has appeared as airline companies such as Ryanair, Deutsche Lufthansa and Air France–KLM have struggled in the 1st half of 2024. For Ryanair ticket prices dropped by 15% as customers refused to fly at higher prices. Liberum analyst Gerald Khoo stated that “More aggressive pricing by the market leader is likely to result in adverse fallout for the other European airlines.”
Looking ahead U.S. airlines are expected to moderate capacity as annual domestic seat growth is expected to cool down to 3% from the current 6%. Airline carriers hope that this will boost pricing power and increase earnings. Untied’s President Brett Hart last Thursday told investors that “While we see this incredible inflection upon us in the industry, the precise timing and magnitude is difficult to call.”
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