What economic slowdown? Airlines are not seeing it


Airplane taking off from an airport runway in sunset light | Image source: Getty Images
Airplane taking off from an airport runway in sunset light | Image source: Getty Images

First Delta and United, and now American. In the past week, the three largest legacy U.S. airlines have all reported third-quarter revenue in the double-digit billions, with a B, as the industry collectively insists that strong travel demand is trumping concerns over an economic slowdown.

Shares for all three companies have surged in the past five days — American Airlines up 12%, United Airlines up 14%, Delta Air Lines up more than 11%, all beating the Dow Jones U.S. Airline Index’s five-day jump of 9.5%.

American Airlines reported a $483 million profit for the third quarter and a record $13.46 billion in revenue during the three months that ended on the last day of September. That’s up 13% from 2019 despite flying nearly 10% less, reflecting higher fares.

“Demand remains strong, and it’s clear that customers in the U.S. and other parts of the world continue to value air travel and the ability to reconnect post-pandemic,” said CEO Robert Isom.

Earlier this week, United reported a third-quarter net profit of $942 million, down 8% from the same quarter in pre-pandemic 2019, and $12.9 billion in revenue, up 13% compared to the third quarter three years ago.

Last week, Delta was singing the same happy tune. “Global demand is continuing to ramp as consumers shift spend to experiences, businesses return to travel and international markets continue to reopen,” Delta Air Lines CEO Ed Bastian said on his company’s third-quarter earnings call, where he reported a $966 million profit and record operating revenue of $12.8 billion, 3% higher than the same quarter in 2019.

The carriers’ huge revenue numbers are thanks to airfare inflation, up a massive 42.9% annually, according to recent Consumer Price Index (CPI) data from the Bureau of Labor Statistics. That’s the highest on record and more than five times higher than the overall inflation rate of 8.2%. During the month of September, average airfares rose 0.8% — twice as fast as the rate for all items.

Airline ticket prices have climbed much faster than overall inflation due to several factors. Russia’s war in Ukraine has driven up fuel costs and, in recent months, an extraordinarily strong rebound in travel demand has collided with massive challenges to supply, including labor shortages, aircraft delivery delays and other issues.

Still, passengers have been willing to pay higher prices that have more than offset airlines’ rising costs.

Consumers should brace for more airfare inflation ahead. Ticket prices will remain high going into the holiday season, according to the deal-finding site Hopper, whose Holiday Travel Outlook report shows that Thanksgiving airfare prices are currently up 25% from last year and Christmas airfares are up 55%.

This article was first published on forbes.com