Travelers walk through O’Hare International Airport in Chicago, Illinois, on December 20, 2024 ahead of the upcoming Christmas holiday.
Kamil Krzaczynski | AFP | Getty Images
Higher airfare is in store this year as strong demand, even during the dead of winter, and limited capacity growth prompt airlines to flex their pricing power.
Fare-tracking platform Hopper this month said domestic “good deal” U.S. airfare in January is at $304, up 12% over last year, with more domestic flights going for more than they did last year through at least June.
Late deliveries of new aircraft from Boeing and Airbus, air traffic constraints and financial pressures have limited airlines’ ability to expand flights, which has pushed fares higher. Spirit Airlines, which filed for Chapter 11 bankruptcy protection in November, was the most dramatic case and has slashed its flights to cut costs.
American Airlines on Thursday forecast a jump in revenue of as much as 5% in the first quarter over the same three months of 2024, while capacity will be flat or even down as much as 2%.
“We do expect airfare to come up,” American CFO Devon May said in an interview. The airline forecast a wider-than-expected-loss for the first quarter, however, disappointing investors as it expects an increase in costs, like higher wages from new labor contracts signed last year.
Startup carrier Breeze Airways on Thursday reported its first quarterly operating profit, for the fourth quarter, and founder David Neeleman, the founder of JetBlue Airways, said conservative industry growth is boding well for future results.
“The tide is lifting a lot of boats,” he said in an interview. “We’re exceeding our targets in revenue. Momentum we saw in the fourth quarter is continuing into the first.”
Alaska Airlines late Wednesday said it expects revenue growth for the first quarter to rise by “high single digit” percentage points with capacity up no more than 3.5%.
United Airlines, which had a first-quarter earnings forecast that far surpassed analysts’ expectations, shared a similar sentiment, particularly for domestic trips.
“The domestic pricing environment is improving as underperforming airlines remove unprofitable capacity at an increasing rate and business traffic growth accelerates,” United’s chief commercial officer, Andrew Nocella, said on the company’s earnings call on Wednesday. “Industry fare sales are less prevalent with lower discount rates as airlines are prioritizing profitability.”
Delta Air Lines, which kicked off airline earnings season earlier this month, forecast revenue growth of 7% to 9% for the first quarter, with unit sales growing across its globe-spanning network.
Off-season travel, particularly to Europe, has been a big bright spot for large U.S. carriers. Delta’s president, Glen Hauenstein, for example, said on the Jan. 10 earnings call that trans-Atlantic unit revenue should be up mid-single digits with demand “benefiting from strong U.S. point of sale and an extension of the season with unprecedented off-peak results.”
Carriers are also seeing more customers buy up for roomier — and pricier — seats.
JetBlue Airways and Southwest Airlines are scheduled to report fourth-quarter results and provide their 2025 outlooks next week. Both carriers are trying to ramp up revenue with more new premium seating and by debuting other amenities.
