Mon, 04 Dec 2023

US airlines forecast strong 2023 travel demand

Robert Besser
31 Jan 2023, 20:05 GMT+10

NEW YORK CITY, New York: After reporting record revenues in the fourth-quarter of 2022, US airlines expect strong travel demand to continue into 2023, despite economic uncertainty and rising labor and operations costs.

American Airlines, JetBlue Airways Corp and Alaska Air Group forecast better-than-expected full-year earnings this week.

As consumers began purchasing flight tickets after the end of COVID-19 pandemic restrictions, the industry is witnessing growth, despite markets dealing with runaway inflation, rising interest rates and economic uncertainty.

Post-holiday bookings have surged, underpinned by domestic and short-haul international flights, American Airlines Chief Executive Robert Isom said, stating, "We expect a strong demand environment to continue in 2023 and anticipate further improvement in demand for long-haul international travel this year," as quoted by Reuters.

While the scarcity of aircraft and limited capacity have enabled airlines to raise fares to offset rising costs, higher pilot pay and other pressures could reduce airlines' profits.

JetBlue CFO Ursula Hurley told analysts, "In addition to the higher labor costs, we are working hard to offset cost pressures from higher rents and landing fees tied to operating and growing in high-cost terminals across our high-value geography, as well as elevated maintenance activity, given the age of our fleet."

In 2023, JetBlue predicts expenses, excluding fuel, to rise from 1.5 to 4.5 percent.

However, payment giant Mastercard forecasted current-quarter revenue growth short of Wall Street estimates this week, stressing that the pent-up demand for travel will diminish, going forward into the future, indicating that travel demand was losing some steam.

While the US economy grew faster than expected in the fourth quarter, the growth rate could be slowed by US Federal Reserve interest rate hikes.

China's recent re-opening may also boost international travel, but demand remains uncertain.

In a note, Cowen's Becker said, "The airline industry will benefit as travel reopens, but we anticipate more outbound travel from China to the West than from the West to China, as Chinese consumers take their turn at 'revenge travel."

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