US airlines reach turning point in recovery

US airlines reach turning point in recovery

DALLAS- The Associated Press
US airlines reach turning point in recovery

U.S. airlines say they have hit a turning point: After a lousy first quarter, they expect to be profitable as Americans return to travel in the biggest numbers since the start of the pandemic.

American Airlines is the latest carrier to give a rosy outlook for the rest of 2022. American said on April 21 that although it lost $1.64 billion in the first quarter, sales hit a record in March, and the company expects to earn a profit in the second quarter.

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

American’s upbeat view echoed similar comments from Delta Air Lines and United Airlines, which both predicted in recent days that they will earn full-year profits despite big losses in the first quarter.

Air travel was subdued in January and February by the omicron variant that caused an increase in COVID-19 cases among both travelers and airline employees. But travelers came back in March, and airline executives believe that Americans are eager to travel this summer and won’t be discouraged by another, smaller uptick in coronavirus cases and higher airfares.

Industry officials attribute rising airfares to a combination of covering higher fuel costs, a limited number of flights compared with schedules before the pandemic 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.”

The recovery is being powered by leisure travelers, but the airlines say they are seeing more business travelers.

American said overall business travel is 80 percent of pre-pandemic levels, dragged down by corporate travel, which is only 50 percent of 2019 levels. Isom said, however, that corporate bookings are the highest they have been since the start of the pandemic, “and we expect that to continue as more companies reopen their offices.”

Along with higher revenue, however, airlines face higher costs for fuel and labor. American’s fuel bill more than doubled from a year earlier, and payroll costs rose more than 15 percent.

Airlines struggled with a nascent recovery in travel last summer, as understaffing contributed to thousands of canceled flights.

Now, facing a much bigger boom - the number of people going through checkpoints at U.S. airports is up more than 50 percent from a year ago to 2.1 million a day in April - it is unclear whether airlines have done enough hiring to avoid bigger disruptions this summer.