High-cost airline tickets do not reduce demand in the United States

Air ticket sales are recovering sharply 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 increase in fuel prices resulting from the war in Ukraine.

The three largest US companies in the sector recorded 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 pandemic of covid-19, the need to travel seems to entice passengers. American and Delta had record sales in March.

United boss Scott Kirby believes demand is at its peak since joining the company 30 years ago.

However, according to government data, the prices of airline tickets purchased in the United States have increased significantly in recent times, by 10.7% in March compared to for example in February.

The increase allows companies to offset the rise in the price of fuel, normally the second largest source of spending for these companies after staff.

“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 at the height of pandemic American new CEO Robert Isom said during a conference call.

doubts and hopes

As of Monday, following a court decision, passengers are no longer required to wear masks on planes in the United States, prompting mixed reactions from passengers happy to get rid of them and others worried 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 another because the demand and reserves are so strong,” said Philip Baggaley, an analyst at S&P Global.

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

“The trends are heading in the right direction and airlines have taken drastic measures to cut costs during the pandemicbut (with rising costs) they are earning even less money per seat than they did a few years ago, ”said Peter McNally of consultancy Third Bridge.

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

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

The do you travel businesses, a lucrative segment for businesses, appear to be starting to recover.

In American’s case, it expects the sales generated by the do you travel firms return in the second quarter to 90% of what they were before pandemicRobert Isom said.

International flights delayed

International flights are still a bit delayed, and American’s revenue in this segment has only recovered 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, airlines are betting on the return of transatlantic flights and flights to South America, Philip Baggaley points out.

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

The S&P Global analyst expressed particular concern about the trend in air ticket purchases after the season do you travel of the summer, as “the US economy is slowing down” and the inflation it is still “very high”, he warns.

AFP is a leading global information agency offering fast, verified and comprehensive coverage.

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