CHICAGO - A travel boom has produced bumper earnings for major U.S. carriers this year but signs of softening demand on domestic routes have amplified worries that the bubble is about to burst, sparking a sell-off in airline stocks and prompting analysts to slash their earnings estimates.
But analysts and investors are wondering if it is early signs of waning demand. A drop in international fares in recent weeks after the summer travel rush has only reinforced those concerns.The airline industry, which is facing higher fuel and wage bills, has been relying on robust demand to mitigate inflationary pressure with higher fares.
Ultra-low-cost carrier Spirit Airlines last month cut its profit outlook for the third quarter, citing"heightened promotional activity with steep discounting." Frontier Airlines said it was facing pressure to offer"very, very low" fares to fill up its planes.