FILE PHOTO: An American Airlines Embraer ERJ-175LR plane takes off from Los Angeles International airportCHICAGO/LONDON - Record summer travel demand was tipped to translate into bumper earnings for airlines - but quarterly reports are looking less than stellar.
Passenger traffic in the U.S. is hitting records levels this year. In the first six months, the U.S. Transportation Security Administration screened an average of about 2.46 million airline passengers per day, up 6% from last year. In May, American slashed its second-quarter profit forecast, citing weaker pricing power in the domestic market, and while the Texas-based carrier has vowed a reboot, analysts say reversing course will be time-consuming and costly.
The low-cost carrier has cut its second-quarter revenue outlook. Fitzgerald said Southwest has few levers to materially boost its revenue performance, raising the risk to its balance sheet.The first quarter for European airlines was tougher than anticipated, and Ryanair's second-quarter results offered little solace for investors on Monday.
Deutsche Lufthansa slashed its 2024 earnings guidance for a second time and issued a profit warning for its second quarter last week due to weaker yields. U.S. airlines are now moderating capacity. Annual domestic seat growth is estimated to slow to 3% in the September quarter from 6% a quarter ago. Some carriers hope this will boost their pricing power, but that may not be enough to increase earnings.