US airlines post profits, but struggle to boost capacity
NEW YORK
Strong travel demand has enabled the biggest U.S. airlines to return to profitability, but efforts to restore capacity back to pre-pandemic levels face manpower and cost challenges.
For the first time in the COVID-19 era, both American Airlines and United Airlines reported profitable quarters without the benefit of government support programs.
Delta Air Lines also was profitable in the second quarter.
So-called “pent-up demand” for flying has led to brisk ticket sales despite high prices.
American’s revenues surged 12 percent compared with the same quarter in pre-pandemic 2019, reaching $13.4 billion in the April to June quarter, the most ever.
Delta’s revenue jumped 10 percent to $13.8 billion, while United’s rose six percent to $12.1 billion.
But all three carriers are running fewer flights than they were in that period, with Delta off the most at 18 percent.
Strong pricing has enabled the industry to offset the hit from much higher jet fuel prices, as well as increased wages.
But carriers have struggled operationally as they have ramped up The problems were especially bad in June, when bad weather, intermittent issues with air traffic control and staffing shortfalls at airlines led to widespread flight cancellations and delays.
Overall, even with the better performance in the second quarter, “it’s fundamentally a less profitable business” than before the pandemic, said Peter McNally, analyst at Third Bridge, a consultancy.
For one thing, while business travel has come back partly, McNally believes it may never fully hit its pre-COVID level due to the greater use of virtual meetings. Corporate travel has traditionally been a huge driver of airline profits.
Costs are another issue. While jet fuel prices are expected to retreat somewhat in the third quarter, they remain well above historic levels. A shortage of pilots and other key personnel is also seen pressuring wages for the foreseeable future.
And while customers have so far not been deterred by higher ticket prices, there are doubts about how much longer this behavior can continue, especially with persistent inflation.
Airlines have been aggressively adding staff, but making the most of new hires takes time.
“Our active headcount is at 95 percent of 2019 levels, despite only restoring less than 85 percent of our capacity,” said Delta Chief Executive Ed Bastian said.
American forecast that its third quarter will be between eight and 10 percent below pre-pandemic levels, while United sees a drop of 11 percent and Delta a fall of between 15 and 17 percent.
Just when the industry can fully restore capacity remains foggy.
“It’s dependent on the supply chains, aircraft manufacturers and ultimately, pilot supply to all get back in sync,” said American Chief Executive Robert Isom.
