As the airline industry continues to evolve, United Airlines’ CEO confirms that reduced domestic seats are here to stay, driven by high operating costs and a shift towards more profitable flying.
United Airlines CEO Confirms Industry Trend: Reduced Domestic Seats
A reduction in airline seats in the domestic market, which has driven up ticket prices and improved earnings for US airlines, is here to stay. According to United Airlines CEO Scott Kirby, this trend will continue due to various factors.
High Operating Costs Priced Out Low-Cost Carriers
High operating costs at major airports such as New York, Chicago, Los Angeles, and San Francisco have made it difficult for low-cost airlines to operate profitably. As a result, they are focusing on markets where they have a competitive advantage and limiting their unprofitable flying.
Transformed Industry with Stronger Profit Outlook
Kirby stated that the industry has undergone significant changes, with carriers adopting a more disciplined approach to seat additions. This trend is expected to continue, leading to stronger profit margins for airlines.
Analysts Optimistic about Industry’s Future
The airline industry‘s restraint in adding seats has turned analysts and investors optimistic about its future prospects. The NYSE Arca Airline index has gained 36% in the past six months, outpacing a 9% jump in the S&P 500 index. United’s stock has surged 126% during this period.
Shortage of Aircraft to Continue
The shortage of aircraft due to production and engine delays is also expected to continue, putting a cap on the industry’s growth plans. Kirby stated that the availability of wide-body jets will remain a challenge for at least another decade.
International Environment Expected to Remain Strong
Kirby predicted that the international environment will be stronger for longer, with higher demand driving airfare increases. This trend is expected to continue in the coming years, supporting the airline industry’s profit outlook.
