Major airlines reported on Tuesday that travel demand has recuperated quicker than expected this year, which is a positive development for an industry that took a massive blow by Covid and a hint that carriers intend to pass on increasing fuel prices and other costs to customers.
Last week, US jet fuel prices soared to 2008 highs, fueled by Russia's invasion of Ukraine, which raised concerns about faltering crude supplies as countries sanctioned the oil producer. Despite the fact that aircraft fuel prices have fallen, they are still up 35% this year.
More expensive tickets are to be expected as a result of the combination of increasing demand and higher costs, which were already on the rise before the Russia - Ukraine conflict and the usual increase during peak spring and summer travel times.
During a JPMorgan investor conference, Delta Air Lines President Glen Hauenstein remarked, “We are very, very confident of our ability to recapture over 100% of the fuel price run-up in the second quarter and through probably the end of the summer.’
Customers paid $6.6 billion on plane tickets on carriers' websites last month, surpassing a similar pre-Covid month for the first time in the pandemic, according to Adobe. According to the Airlines Reporting Corp, average fares sold by U.S. travel agencies increased to $464 in February from $409 a month earlier.
Delta confirmed that bookings are outperforming 2019 and that the airline recorded its best one-day cash sales in its nearly 90-year history last week, according to Hauenstein.
Delta said it anticipates first-quarter revenues to be 78 percent of 2019 levels, up from an estimate in January of only 72 percent. Airlines have been comparing revenue and capacity to 2019 to indicate how much revenue and capacity have recovered since the epidemic began.
American Airlines forecasted a 17 percent reduction in first-quarter revenue from 2019, which is better than its January prediction of a 22 percent drop over two years.
Even with a sluggish recovery in business travel and long-haul international trips, which are generally two huge money makers for large airlines, CEO Doug Parker noted at the same conference that revenue on two different days last week was up 15% compared to 2019.
Parker, who will hand over the reins to firm President Robert Isom at the end of the month, stated, "We can make money at oil prices of $100 a barrel or higher, and we will. It may have a short-term impact. But it is not a long-term impact on the industry’s ability to make money.”
American stated in a filing that it expected first-quarter capacity to be as much as 12% lower than the same period last year, a slower pace than the 8% to 10% decline it predicted two months ago.
Lower capacity frequently means fewer seats available, which might result in higher prices.
On Tuesday, airline stocks climbed across the board. In early afternoon trading, Delta, American, and United were all up around 7%, beating the S&P 500's 1.7 percent gain.
United Airlines stated its 2022 schedule will be down by the "high single digits" compared to 2019. The airline has been more cautious than some of its counterparts during the pandemic. However, the Chicago-based airline expects first-quarter revenue to be "near the better end" of its forecast of a 75 percent to 80 percent increase over three years.
United noted in a filing that "“System bookings for future travel have improved close to 40 points since the first week of 2022 and business traffic has increased more than 30 points since the peak of the Omicron impact in January 2022.”
Southwest Airlines increased its revenue forecast to 92 percent of what it was in 2019. In early afternoon trade, the company's stock was up 3%.