More expensive plane tickets do not discourage demand in the US

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More expensive plane tickets do not discourage demand in the US


An American Airlines plane lands at Miami International Airport on December 10, 2021. afp_tickers

This content was published on April 21, 2022 – 17:52

(AFP)

The sale of airline tickets rebounded strongly despite high prices after a slowdown linked to the omicron variant of covid-19 at the beginning of the year, with which US airlines hope to return to positive numbers despite the rise in derived fuel prices of the war in Ukraine.

The three largest US companies in the sector posted losses in the first quarter of the year ($1.6 billion for American Airlines, $1.4 billion for United Airlines, $940 million for Delta Air Lines).

However, more than two years after the start of the covid-19 pandemic, the need to travel seems to tempt passengers. American and Delta posted record sales in March.

United boss Scott Kirby believes demand is at its highest since he joined the business 30 years ago.

However, according to government figures, the prices of plane tickets purchased in the United States have increased considerably in recent times, 10.7% in March compared to February, for example.

The increase allows companies to compensate for the increase in the price of fuel, normally the second source of expenses for these companies after personnel.

“We saw in March what was possible (…) with an increase in demand thanks to the drop in contagion rates (of covid-19), the relaxation of restrictions and a recovery” of frustrated travelers in the height of the pandemic, American’s new CEO Robert Isom said during a conference call.

– Doubts and hopes –

Since Monday, following a court decision, passengers are no longer required to wear masks on planes within the United States, prompting mixed reactions from passengers delighted to get rid of them and others concerned about the risk of contagion.

The federal government announced Wednesday that it would appeal the decision.

“In the short term, I don’t think it will work one way or the other because demand and reserves are so strong,” said Philip Baggaley, an analyst at S&P Global.

American Airlines, which published its figures on Thursday, expects to return to profitability in the second quarter; United expects to make a profit throughout the year; and Delta already had a balance in the green last year.

“Trends are going in the right direction and airlines have taken drastic steps to cut costs during the pandemic, but (with rising costs) they are still making less money per seat than they were a few years ago,” said Peter McNally. , from the consulting firm Third Bridge.

Given the difficulties in recruiting sufficient personnel, and not being able to count on all the aircraft planned in their fleet due to setbacks with Boeing aircraft, the companies are refraining for the moment from offering the same number of flights as before the outbreak of the pandemic. .

American plans to operate in the second quarter at 94% of its capacity compared to 2019, while United wants to “gradually” increase capacity to ensure reliability.

Business travel, a lucrative segment for companies, appears to be starting to pick up.

In the case of American, it expects sales generated by business travel to return in the second quarter to 90% of what they were before the pandemic, Robert Isom said.

– International flights delayed –

International flights are still lagging a bit, with American’s revenue in this segment only recovering 60% from the March 2019 level.

Flights to Mexico City and the Caribbean are highly sought after and, with the gradual lifting of health restrictions, companies are betting on the return of transatlantic flights and flights to South America, highlights Philip Baggaley.

Traffic to the Pacific is limited due to the strict measures that still remain in place in China and Japan.

The S&P Global analyst was particularly concerned about the trend in air ticket purchases after the summer travel season, as “the US economy is slowing down” and inflation remains “very high,” he warns.

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