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Airlines See Higher Revenues as Travelers Face Increasing Airfares

BusinessAirlines See Higher Revenues as Travelers Face Increasing Airfares

Airlines are reporting better-than-expected unit revenues as the summer travel season comes to a close, indicating that travelers will likely face higher airfares in the coming months. Alaska Airlines has raised its third-quarter profit forecast to between $2.15 and $2.25 per share, up from a previous estimate of no more than $1.60 per share. The airline also anticipates a unit revenue increase of up to 2%, compared to earlier projections of flat or slightly positive growth.

Similarly, Delta Air Lines has noted an improvement in domestic and trans-Atlantic unit revenues for September, though its overall quarterly growth will be limited to 1%, down from a previous forecast of 4%. The reduction comes after Delta faced a major disruption in July, when a CrowdStrike outage led to the cancellation of approximately 7,000 flights, costing the airline an estimated $500 million.

Alaska Airlines benefited from the Delta outage, reporting better-than-expected revenue for July, as many passengers sought alternatives. The airline stated that its stronger performance in August and September further contributed to its positive outlook.

Despite some earlier challenges, U.S. airlines are beginning to see a shift in pricing power. After months of declining airfare prices, the U.S. inflation report for August showed a 3.9% rise in airfare prices. This follows five consecutive months of decreases, signaling that travelers may face steeper ticket prices going forward.

Budget carriers like Frontier Airlines and JetBlue Airways have also seen stronger-than-expected performance. Frontier, for example, revised its outlook, suggesting it may break even for the quarter, after initially forecasting a loss margin of 3% to 6%. JetBlue has similarly raised its unit revenue growth expectations, citing stronger demand and a boost from rebooking passengers affected by technology-related cancellations in July.

Full-service airlines like Delta and United are also focusing on attracting higher-paying customers with premium offerings, such as enhanced in-flight amenities and loyalty program improvements. United’s CFO, Mike Leskinen, highlighted the company’s commitment to expanding its competitive edge through premium services like better food options, improved Wi-Fi, and upgrades to its Polaris international first-class product.

Meanwhile, U.S. airlines have slowed their hiring pace due to aircraft delivery delays from Boeing and Airbus, as well as a moderation in demand after a period of rapid expansion.

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