Analysis-Airlines test fliers' tolerance for high prices to bolster profits
By Joanna Plucinska and Rajesh Kumar Singh
LONDON/CHICAGO (Reuters) — U.S. and European airlines will aim to boost profits again this year with higher ticket prices as they try to squeeze what they can from the post-COVID travel boom and mitigate higher costs amid persistent plane shortages, investors and executives say.
Major carriers are straining to lay on more flights to meet demand, but are struggling due to delays in new plane deliveries from Airbus and Boeing (NYSE:BA) and the grounding of jets using some RTX engines over potential defects.
Tight supplies, in turn, are keeping air fares high, allowing carriers to pass on higher jet fuel, labour and maintenance costs.
That has sent average revenues per passenger — known in the industry as yields and a proxy for airline pricing power — to 6.2% last year, its fourth straight year of growth, according to data from global trade body IATA.
Yields are set to rise further in 2024, albeit at a slower pace, by around 1.8%, IATA has predicted.
European airlines' yields this summer — the busiest time of year — will exceed last year's levels, hitting as high as 8.5%, and increase even more in 2025 as travel demand continues and plane delivery delays persist, according to Bernstein forecasts.
Bernstein analyst Tobias Fromme estimates demand will have grown about 15-20% this summer since 2019, while capacity has barely budged.
«Higher fares this summer will keep driving profits. Airlines will make more money because customers are still willing to pay more,» said Jamie Lindsay (NYSE:LNN), an airline investor at Artemis Investment.
Interviews with half a dozen analysts, executives and investors and fare data show airlines' resilience as they recover from the pandemic when planes
Read more on investing.com
