It's Wait-and-See on U.S. Fall Demand
Fuel is up, and that's a potential problem. But airlines haven't yet shared much about advance bookings. Also: Why did United buy that land in Denver? And does Sun Country need a second hub?
American children have returned to school, effectively ending the U.S. summer holiday, and so I was hoping to hear about fall and winter demand trends from the four U.S. airlines that shared updates Wednesday with investors. Many of us are searching for nuggets about whether business travel has further recovered, or whether the summer leisure travel season has extended into September, like it has the past two years. Some of you also wonder if the worst-case scenario is finally upon us — has demand cratered at the same time capacity and input costs are up?
We’ll have to wait longer for concrete details, because only one of the four carriers was in the mood to share on Wednesday(two airlines presented at an industry conference while two more released investor updates) about broader second-half 2023 demand trends. But all four airlines had a shared concern about one of the airline industry's long-time bogeymen: the rising cost of fuel.
First, the airline that came closest to a real business update — Southwest. It revised its third quarter RASM guidance on Wednesday, telling investors to expect a decrease of 5 to 7 percent year-over-year in the third quarter. Prior guidance called for 3-7 percent. Still, other than saying August 2023 close-in yields were at the lower edge of prior expectations, the airline didn’t call out demand weakness. It even said business demand might be slightly better for the third quarter, compared to the second. Then again, it’s the fourth quarter that could be the tricky one, and the company said nothing about October-December, because it’s a little early.
United also filed an investor update, timed to CFO Gerry Laderman’s appearance at the TD Cowen 16th Annual Global Transportation Conference. United flagged fuel prices that have increased more than 20 percent since the airline’s mid-July earnings call but maintained all other guidance on capacity and revenue. Also at the conference, Jude Bricker, CEO of Sun Country, warned about fuel. "The thing that's changed is fuel prices, which are up substantially versus where we were a month ago but other than that everything is on track," he said.1 In another investor update released Wednesday, Hawaiian also noted rising fuel prices, raising its guidance for the price it expects to pay. Like Southwest, it lowered its unit revenue guidance, blaming the fires in Maui last month but saying little about overall demand.
While many of the carriers were parsimonious with context about what they expect ahead, some shared nuggets worthy of publication. I appreciate that TD Cowen's Helane Becker pushed Laderman on why United bought 113 undeveloped acres near Denver International Airport, and I was struck by Laderman’s (slightly) revealing answer. I also enjoyed Bricker’s commentary on why the airline isn’t flying to Hawaii, and why it’s still so invested in Minneapolis. And once again, I felt bad for Hawaiian both because of the fires and due to engine inspections on many of its A321neos. It can't catch a break.
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