Demand for air travel is breaking records, but airline profits are not.

Record summer air travel demand isn’t translating into record profits for U.S. airlines, and airlines will have to answer for that discrepancy when they report their quarterly results this month.

Some airlines have predicted Standard orderand in some cases, revenue. On Sunday, the Transportation Security Administration screened more than three million people, a record for a single day.

But higher exhaustion Other costs have eaten into airlines’ profits. To cope with slower demand growth and other challenges, some airlines have had to cut their fares. slow down if not Recruitment stop Compared to recruitment campaigns when they rebuilt themselves after the pandemic.

Some airlines are facing Delay One of Airbus’ most fuel-efficient new aircraft Boeing At the same time that Pratt & Whitney engine remember he have My land Dozens of planes.

However, U.S. airlines have increased their capacity, filling about 6% more seats in July than they did in July 2023, according to aviation data firm OAG. The expansion maintains Travel Fare of ChoiceThe sector’s shares fell behind the broader market.

the NYSE Arca Airline Index Which tracks 16 mostly U.S. airlines, is down about 19% this year, while Standard & Poor’s 500 It has advanced by more than 16%.

‘clear as clay’

What airlines will look like in the third quarter is “clear as mud,” Raymond James analyst Savanthi Seth said in a note Friday, citing headwinds such as potential weaker spending from economy customers, the impact of the Paris Olympics on some European bookings, and potential shifts in corporate travel demand.

In addition, some travelers chose to take trips in late spring and early summer, raising questions about late summer demand.

Investors will get more insight into the traditionally slower end of summer and the rest of the year when airlines report their quarterly results, starting in Delta Air Lines Thursday.

Analysts believe that Delta is Best of the bunchlargely due to the airline’s success in marketing more expensive, premium seats and its lucrative deals with American Express.

In April, Delta, the most profitable U.S. airline, forecast adjusted quarterly earnings of $2.20 to $2.50 per share for the second quarter, which would be lower than the $2.68 per share it earned a year earlier.

Delta, its competitor United Airlineswho will report back the following week, and Alaska Airlines Qatar Airways is the top pick for Wolfe Research analyst Scott Grubb, who said in a research note on June 28 that the three carriers have lower earnings risk and better free cash flow than other airlines.

Delta and United shares are up about 14% this year through July 5, the most prominent stocks in a sector that has been down sharply this year. Alaska shares are down about 14% this year. 2%.

Cheaper prices

Airports are bustling this summer. Nearly three million people passed through U.S. airport checkpoints on June 23 alone, a record number, according to the Transportation Security Administration.

Airlines are expanding their flight schedules, both domestically and internationally, which has led to lower prices. According to consulting firm Airline/Aircraft Projects, flight capacity between the United States and Europe in July was up about 8% compared with last year, with the new routes largely targeting leisure travelers.

Summer flights between the United States and Europe in economy cost an average of $892, compared to $1,065 in summer 2023, price-tracking firm Hopper reported in June.

Airfare prices fell about 6% in May compared with a year earlier, according to the latest U.S. inflation data.

Lowered expectations

Despite the increase in passenger numbers, some airlines admitted that sales were weaker than expected due to the increase in flights. American Airlines On May 28 It lowered its second-quarter revenue and profit forecasts. The company announced that its commercial director will leave his position after the sales strategy failed.

“The domestic supply-demand imbalance has led to a weaker domestic pricing environment than we expected,” American Airlines CEO Robert Isom said at an industry conference held by Bernstein the next day. “There is more reduction activity than we saw a year ago. Now, industry capacity is expected to decline in the second half of the year, and that should help.”

Southwest Airlines cut it Q2 Forecast In late June, it cited changing demand patterns. The Dallas-based airline is facing pressure to quickly change its long-profitable business model — which involves no seat assignments and a single class of service — as big rivals like United and Delta tout strong growth from premium cabins.

The airline is trying Activist investor repels Elliott Investment Management, which It revealed a stake worth about $2 billion. In June, he called for a change in leadership.

“We will adapt as our customers’ needs adapt,” Southwest CEO Bob Jordan said at an industry event hosted by Politico on June 12, to discuss potential new revenue initiatives.

Both American and Southwest will report second-quarter results toward the end of July.

Make changes

Some loss-making transport companies, such as jetblue airlines And Frontier AirlinesThey are already making changes.

JetBlue was Reduce unprofitable flights This year, make sure that planes equipped with the luxurious business class cabin, where tickets can cost more than four times the price of an economy class ticket, are on the right routes.

Meanwhile, Frontier Airlines and fellow discounter Spirit Airlines Owns Change fees are waived. For standard bus tickets and above, follow the larger tickets, Traditional transport companies’ movements During the pandemic, the two budget airlines announced in May that they would start offering bundled fares that include seat assignments and other extras for which they had previously charged fees.

The soul that struggles with the repercussions judge’s verdict The airline, which has been hardest hit by the Pratt engine failure, was blocked from buying by JetBlue, and last week warned about 200 pilots that they could be grounded. Temporarily suspended This year, according to the pilots’ union.

At Spirit’s annual shareholder meeting in June, CEO Ted Christie said: Ignore suggestions Spirit is considering filing for Chapter 11 bankruptcy protection, with more than $1 billion in debt due in September 2025.