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US Airlines Reach Recovery Turning Point

U.S. airlines said they had hit a turning point. After a lousy first quarter, they expect to make more profit as Americans return to travel in large numbers since the pandemic started.

American Airlines is the latest carrier with an excellent outlook for the rest of the year. Last Thursday, they said despite losing $1.64 billion in the first quarter, sales reached a record number in March, and they expect to earn a profit in the second quarter.

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

Delta Airlines and United Airlines provided similar comments to American Airlines, predicting in the last few days that they will earn a year’s worth of profits despite the significant losses during the first quarter.

In January and February, the omicron variant caused an increase in COVID cases among travelers and airline employees, halting air travel.

However, last March, travelers returned. Airlines executives believe that Americans cannot wait to travel for the summer season and cannot be discouraged by a smaller uptick in cases or high airfares.

Industry experts also believe that the growing airfares are caused by the higher fuel prices, limited flights, and strong demand.

“We are encouraged that indeed month to month, we are seeing a greater increase in fares,” said Vasu Raja, American’s chief commercial officer. “We are seeing a lot of strength in the fare environment.”

According to the airlines, leisure travelers are powering the recovery, but more business travelers are also contributing to it.

American Airlines said overall business travel is 80% of pre-pandemic levels, dragged down by corporate travel, only 50% of 2019 levels. 

However, Isom said corporate bookings are the highest since the pandemic, “and we expect that to continue as more companies reopen their offices.”

However, in addition to the increased revenue, airlines also face increased expenses for fuel and labor. American’s fuel costs nearly doubled from a year ago, while payroll costs increased by 15%.

Airlines struggled with slow growth in passenger numbers last summer due to understaffing, which resulted in thousands of canceled flights. Now facing a greater increase, the number of travelers passing through security checkpoints in U.S. airports is up by more than 50% over a year ago to 2.1 million in April.

It’s unclear if the airlines have increased staffing to avoid larger-scale disruptions this summer. The biggest challenge is the lack of pilots, as it could hinder the capacity of airlines to run more flights than they’d like.

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

American Airlines said it had hired more than 1,100 pilots from the start of last year. The majority came from smaller regional airlines, which left those carriers with a shortage. This is why American will cut its American Eagle schedule in the second quarter.

American Airlines’s passenger capacity is also expected to be lower due to the deliveries of new Boeing 787 aircraft being delayed by manufacturing issues in Boeing factories.

Isom said that American would alter its schedule to match the available aircraft and pilots. He said that American executives “have tremendous confidence” that the airline will run without issue throughout the summer.

American reported a higher first-quarter loss than a year ago when it sank by $1.25 billion. The Fort Worth-based company said that without particular items, it suffered $2.32 per share, which was less than the average forecast of an adjusted loss of $2.43 per share, according to a Zacks Investment Research survey. Revenue climbed by $8.9 billion.

Last Thursday, Alaska Air Group, the parent company of Alaska Airlines, said it suffered a loss of $143 million in the first quarter, compared to a $131 million loss one year ago. Revenue was nearly twice as high at $1.68 billion, but it was down by 10% from the same quarter in 2019.

The Seattle-based carrier has predicted that revenue for the second quarter will be between 5% and 8% higher than the first quarter of 2019.

Following the market’s closure on Thursday, Chicago-based United Airlines Holdings reported Wednesday that it had incurred a $1.38 billion loss in the first quarter but also said it expects to return to profitability in the April-to-June quarter. 

The revenue of $7.67 billion was higher than the previous year. Still, the decline was 21% from early 2019, and the airline continues to operate fewer flights than it did before the pandemic.

The shares of United increased by 9% at the closing bell. American increased by 4%. Delta Air Lines added 3%, while Alaska had little change.

This article originally appeared on AP News.

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Hi, you might find this article from Modern Campground interesting: US Airlines Reach Recovery Turning Point! This is the link: https://moderncampground.com/usa/us-airlines-reach-recovery-turning-point/