The airlines said they had reached a new peak in their recovery from the Covid-19 pandemic and expected record revenues in the current quarter and a return to profits this year.
American Airlines AAL 9.32%
Group Inc. said Thursday its sales hit a record high in March, the first month since the pandemic began that the airline’s total revenue topped 2019 levels.
Airline executives said they expect this momentum to continue, allowing them to increase fares to meet rising fuel costs without undercutting demand.
“In March we saw what’s possible,” US CEO Robert Isom said during a conference call, as falling infection rates and easing restrictions revived demand. “Demand is stronger than ever.”
United Airlines Holdings inc
also said this week that it believes the industry has reached a tipping point. United expects record earnings and a return to profitability for the current quarter.
“The demand environment is the strongest in my 30 years in the industry,” United CEO Scott Kirby said in a press release on Wednesday.
Both airlines said they are seeing signs business travel – a lucrative segment for airlines – is improving as offices reopen and travel restrictions are lifted.
Airlines’ optimistic outlook led to gains in premarket trading. American shares rose over 10% and United shares rose 8.25%. Alaska Air Group shares inc,
which also reported quarterly results on Thursday, rose 5.69%.
“‘The demand environment is very strong and as such we expect to be profitable in the second quarter.’ ”
The first three months of the year were turbulent for airlines. The spread of the Omicron variant of Covid-19 around the holiday and earlier in the year disrupted their operations and disrupted an emerging travel boom as US travelers canceled trips while companies canceled convention plans and kept workers at home.
American Thursday reported a loss of $1.64 billion for the three months ended March 31. After deducting non-recurring items, American posted a loss of $2.32 per share. Analysts polled by FactSet were expecting an adjusted loss of $2.39 per share.
As the number of daily new cases began to fall, travel demand returned, although consumers faced higher fares fueled by kerosene prices and labor costs. American’s operating income increased to $8.9 billion from $4 billion a year earlier. Analysts polled by FactSet were expecting $8.79 billion.
One of the biggest questions airlines are now facing is whether they can keep their operations on track as travelers start packing on planes this summer. Several airlines stumbled last summer, and some have shown signs of strain this spring.
Airlines like Alaska, JetBlue Airways corp
and Spirit Airlines inc
Having recently cut schedules, they said measures would give their operations more flexibility to deal with schedule disruptions. Mr Isom said the airline had performed well during the spring break and now has 12,000 more employees than last summer.
“We sized the airline based on the resources available,” Mr. Isom said. American said its capacity this year will be slightly lower than previously forecast due to delays in deliveries of its Boeing 787 jets, but it hasn’t had to throttle its schedule to adjust for staffing or other constraints. American plans to fly up to 94% of its 2019 capacity in the current quarter.
United, which has kept its flight schedule smaller during the pandemic, said it will ramp up gradually to prioritize reliability.
The cost of kerosene has roughly doubled across the country since last April, when Russia’s invasion of Ukraine pushed up crude prices. American Airlines reported a 64.7% increase in jet fuel prices to $2.80 a gallon in the first quarter, and the airline expects fuel prices to range between $3.59 and $3.64 a gallon in the current quarter.
Airfare prices have started to rise in tandem as airlines pass these higher costs on to consumers. Domestic ticket prices in March were up 20% from 2019 levels and up 15% from February, according to the Adobe Digital Economy Index.
Adobe said this week that there are signs the higher fares are starting to dampen travel hunger. In the first half of April, online domestic bookings fell 2% from the first two weeks of March, although flight bookings are still above pre-pandemic levels.
Last week Delta Air Lines inc
said these higher costs haven’t stopped Americans from traveling. The airline, like American, expects to return to profitability in the current quarter on strong summer sales and bookings.
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