Summer Air Travel: Airlines See Demand Despite Rising Ticket Prices

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Strong travel demand is giving U.S. airlines a financial boost as the industry battles reduced flight schedules, rising fuel and labor costs and worries about the effects that inflation could have on consumer spending, airline officials said this week.

Leisure bookings, which fueled much of the industry’s comeback in the pandemic era, traditionally wane in late summer, but business travelers account for a larger share of air passengers. It comes as dropped coronavirus testing requirements for international travel – including for entry into the United States – lead to an increase in overseas travel. Since late May, international ticket sales have exceeded those of domestic flights, according to BofA Global Research.

“People haven’t had access to our product for two years and we’re not going to quench that thirst in a busy summer,” Delta Air Lines chief executive Ed Bastian said on a conference call Wednesday. on business results. “A lot of that demand is yet to come.”

These trends, echoed by other industry leaders, are another positive sign for an industry struggling to regain its footing after the near collapse of air travel two years ago. The Transportation Security Administration routinely screens more than 2 million people a day at airport checkpoints almost at pre-pandemic levels – but airlines are struggling to meet demand amid staff shortages and a rise in flight cancellations.

Delta is the first major US carrier to report profits for the second quarter of this year, but other airlines are signaling they expect strong results. In a filing with the Securities and Exchange Commission this week, American Airlines said it expects second-quarter revenue to be up 12% from the same period in 2019.

Staffing levels are a hurdle for several carriers, though the industry has received $54 billion in federal pandemic bailouts meant to keep workers on the job when travel demand picks up. At Delta, Bastian said the issue is less about hiring and more about training. The carrier has added 18,000 employees since 2021 and the workforce is 95% of pre-pandemic levels, Bastian said.

Flight cancellations and delays stress already weary travelers

He acknowledged the difficulties on Wednesday, apologizing to Delta customers even as he sought to assure them the carrier was doing what it could to avoid delays and cancellations.

Replicating the work of thousands of veteran employees who left during the pandemic is a challenge, Bastian said, adding that the rebuilding costs have been significant. Executives said the carrier plans to spend $700 million on overtime by the end of this year, 50% more than in 2019.

Delta reported second-quarter profit of $735 million. In 2021, the carrier reported a profit of $652 million, fueled by billions in pandemic relief funds. It posted $13.8 billion in revenue this quarter, up from $7.13 billion in the same period last year.

The gains come as airlines operate fewer flights as ticket prices rise. Several US carriers have cut their schedules, with some ending service in smaller communities while citing a shortage of qualified pilots.

With reduced routes during the pandemic, small airports are on a fragile flight path

Delta previously announced it would cut 100 flights a day between July 1 and August 7, as part of an effort to reduce delays and cancellations. Dan Janki, the company’s chief financial officer, said Delta was operating an 18% smaller network than in 2019. The carrier said schedule reductions would continue through the end of the year in a bid to approach pre-pandemic levels next year. .

“We will have the ability to grow when we are ready, but we want to make sure we focus on what we have,” Bastian said.

Peter McNally, an analyst at research firm Third Bridge, said despite Bastian’s upbeat assessment on Wednesday, the industry still faces challenges while emerging from the pandemic.

“Underlying demand for air travel is strong, but it is a less profitable business today than it was before the pandemic,” he said in a statement. “Planning has become increasingly difficult for airlines and the labor shortage is an issue that is unlikely to be resolved anytime soon.”

After a chaotic ramp-up last summer, airline executives this year have vowed to once again focus on reliability. A series of delays and cancellations over Memorial Day weekend – and again over the Father’s Day and June 16 holidays – prompted Transportation Secretary Pete Buttigieg to press airline executives on how to avoid a similar meltdown over the July 4 holiday.

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Carriers blamed the Federal Aviation Administration, citing staff shortages at major air traffic control centers.

In a memo to employees after the July 4 holiday weekend, Jon Roitman, chief operating officer of United Airlines, said FAA air traffic management initiatives were responsible for 75% of flight cancellations. carrier in the last four months.

The memo prompted a pointed response from the FAA, which said several other issues were to blame.

“It is unfortunate to see United Airlines confusing weather-related air traffic control measures with ATC personnel issues, which could misleadingly imply that a majority of these situations are the result of FAA personnel” , the agency said in a statement. “The reality is that multiple, overlapping factors have affected the system, including airline staffing levels, weather conditions, high volume and ATC capacity, but the majority of delays and cancellations are not not due to FAA personnel.”

Airlines are slashing summer schedules, in a bid to avoid high-profile meltdowns

With the reduction in flight times came an inconvenience for customers.

While data released Wednesday by the Bureau of Labor Statistics showed airfares fell slightly from May to June, the cost of a plane ticket has risen significantly since the start of the year. According to a June report on data collected for the travel industry by Adobe Analytics, the price of a domestic air ticket has jumped 47% since January.

It also means there are fewer options for customers when their flights are delayed or cancelled, although rising prices have done little to dampen enthusiasm for travel. On July 1, the TSA reported screening nearly 2.5 million people — the busiest day for air travel since February 11, 2020.

Among the country’s largest carriers, American and United will release their results next week. Southwest Airlines will follow on July 28.

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