Major US airlines report robust travel bookings despite a $400 million profit hit from surging jet fuel costs, with some raising revenue forecasts
NEW YORK: Major US airlines are reporting remarkably strong consumer demand for travel, even as they brace for a significant financial hit from surging jet fuel prices.
United Airlines, American Airlines, and Delta Air Lines each estimate a $400 million blow to first-quarter profits due to the fuel cost spike linked to the Middle East conflict.
“The 10 biggest booking weeks of our history have been the first 10 weeks of this year,” said United CEO Scott Kirby, describing current demand as “remarkable.”
Delta CEO Ed Bastian echoed this, noting that eight of the company’s 10 highest sales days in history occurred in the current quarter.
In response to the strong bookings, both Delta and American have raised their revenue growth forecasts for the quarter.
American lifted its outlook to more than 10% growth, up from a prior range of 7-10%.
Delta also increased its revenue forecast while confirming its profit outlook.
However, American cautioned that its earnings per share would be at the “lower end” of its guidance.
Beyond the fuel impact, American also cited a $200 million drag from flight cancellations and storm disruptions.
Jet fuel prices have risen sharply following a roughly 40% surge in crude oil prices since late February.
The industry’s second-largest expense after labour, higher fuel costs threaten profitability if carriers absorb them or pass them on to consumers.
“Sales for us have been very, very strong all quarter long,” Bastian said, highlighting broad-based domestic growth.
He reported only a “very modest decline” in European travel demand since the war began.
Delta’s Chief Commercial Officer Joe Esposito stated that “the industry has so far done a good job of moving at good speed on fuel.”
To manage costs, United has decided to trim about 1% of its capacity in May and June.
CEO Kirby said the reduction would target unpopular flying times like red-eye and mid-week flights.
Despite the challenges, American CEO Robert Isom described overall demand as “incredibly strong.”
Investors reacted positively, with shares of Delta jumping 6.6% in Tuesday trading.
United gained 3.2% and American rose 3.5%.