US airlines cut growth plans for the second half of the 12 months

U.S. airlines are reducing capability through the top of the 12 months to chill down an oversupplied domestic market that has led to lower fares and lower profits despite strong travel demand over the summer. That could mean higher fares for passengers.

Last week, U.S. airlines had “one of the industry's largest weekly capacity cuts,” reducing their fourth-quarter capability plans by nearly 1 percent, Deutsche Bank said in an announcement on Sunday. The airlines now expect to extend flight capability by about 4 percent year-on-year in the ultimate three months of the 12 months.

“Despite the significant overall reduction, we expect further cuts in the coming weeks as airlines are expected to further refine their flight schedules,” wrote Michael Linenberg, airline analyst at Deutsche Bank, within the statement.

U.S. airline executives have noted strong demand but a domestic market flooded with flights, forcing them to cut back growth plans, which could drive up prices. The latest U.S. inflation report from earlier this month showed that airfares fell 5.1 percent in June from a 12 months earlier and 5.7 percent from May.

Reducing capability could drive up prices for consumers and boost airline profits, assuming travel demand continues. It is critical for the industry to bring prices to market which might be profitable for airlines and acceptable to consumers, as consumers spend less elsewhere.

Outlook for the third quarter of delta And United However, investors were disenchanted earlier this month when their CEOs said they expected capability cuts across the U.S. industry in August that may have a positive impact on results. Southwest Airlines is forecasting a possible decline in third-quarter unit revenue, a measure of how much money an airline makes for the variety of flights it flies. The airline said last week it could finally abandon its iconic open-seat model and introduce seats with more legroom in a bid to spice up revenue.

American Airlines reported a 46% drop in second-quarter profit on Thursday and said the corporate plans to slow capability growth in the approaching months. In September, year-on-year growth was lower than 1%.

“This excess capacity resulted in a larger discount in the quarter than expected,” CEO Robert Isom said on a conference call last week. Overall, American is planning growth of three.5 percent within the second half of the 12 months, after growing by about 8 percent in the primary six months of the 12 months.

Low-cost and discount airlines have been more aggressive in canceling unprofitable routes and reducing their capacities. These airlines are planning a decline of two.2 percent within the fourth quarter in comparison with the identical period last 12 months, Deutsche Bank said.

JetBlue AirwaysFor example, this 12 months it has cut loss-making routes and deployed aircraft on more popular city pairs. The airline is predicted to announce its results before the stock market opens on Tuesday.

Spirit AirlinesMeanwhile, warned of a larger-than-expected loss for the second quarter after non-ticket revenue, which incorporates fees akin to checked baggage and seat reservations, was lower than expected.