US airlines optimistic for a turning point in recovery

‘Demand is as strong as we have ever seen it,’ American Airlines’ chief executive says

US airlines say they have hit a turning point: After a lousy first quarter, they expect to be profitable as Americans return to travel in the biggest numbers since the start of the pandemic.

American Airlines is the latest carrier to give a rosy outlook for the rest of 2022. The airline said on Thursday that although it lost $1.64 billion in the first quarter, sales hit a record in March, and the company expects to earn a profit in the second quarter.

“Demand is as strong as we have ever seen it,” American Airlines’ chief executive, Robert Isom, told analysts.

Shares of American and other airlines rose in morning trading.

American’s upbeat view echoed similar comments from Delta Air Lines and United Airlines, which both predicted in recent days that they will earn full-year profits despite big losses in the first quarter.

Air travel was subdued in January and February by the Omicron variant that caused an increase in Covid-19 cases among both travellers and airline employees. But travellers came back in March, and airline executives believe that Americans are eager to travel this summer and won’t be discouraged by another, smaller rise in coronavirus cases and higher airfares.

The recovery is being powered by leisure travellers, but the airlines say they are seeing more business travellers.

American said overall business travel is at 80 per cent of pre-pandemic levels, dragged down by corporate travel, which is only 50 per cent of 2019 levels. Isom said, however, that corporate bookings are the highest they have been since the start of the pandemic, “and we expect that to continue as more companies reopen their offices".

Along with higher revenue, however, airlines face higher costs for fuel and labour. American’s fuel bill more than doubled from a year earlier, and payroll costs rose more than 15 per cent.

Airlines are also facing a limited supply of pilots, which could limit their ability to operate as many flights as they would like.

“The pilot shortage for the industry is real, and most airlines are simply not going to be able to realise their capacity plans because there simply aren’t enough pilots, at least not for the next five-plus years,” United chief executive Scott Kirby told analysts on Thursday.

American said it has hired 1,100 pilots since the start of last year. Many of those came from smaller, regional airlines, leaving those carriers with shortages. As a result, American will trim its American Eagle schedule in the second quarter.

Off-duty Delta Air Lines pilots protest against scheduling practices and long hours outside Seattle-Tacoma International Airport in Washington.  Reuters

American’s passenger-carrying capacity will also be lower than planned because deliveries of new Boeing 787 jets have been delayed by production problems at Boeing factories.

Alaska Air Group, the parent of Alaska Airlines, said on Thursday that it lost $143 million in the first quarter, compared with a $131 million loss a year earlier. Revenue more than doubled to $1.68 billion but was down 10 per cent from the same quarter in 2019.

The Seattle-based airline forecast that second-quarter revenue will be 5 to 8 per cent higher than in the same quarter of 2019.

United Airlines Holdings reported a $1.38bn loss for the first quarter but said it expects to return to profitability in the April-to-June quarter. Revenue of $7.67bn was up from a year ago but down 21 per cent from early 2019, as the airline continues to run fewer flights than before the pandemic.

Updated: April 21, 2022, 6:13 PM