Demand for long-haul flights is still at record levels. However, prices could rise in the coming months as airlines face rising costs.
United Airlines said Wednesday during an earnings call that costs will rise in the coming quarter but demand for travel remains strong.
United CEO Scott Kirby said he is confident United can withstand a difficult operating environment – caused in part by rising fuel costs and the war in Israel – thanks to its extensive domestic and international networks as well as its offering of cabin classes that offer more to consumers Offer choice when it comes to traveling.
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“Even in a challenging industry environment, we are delivering strong absolute results while delivering the best relative results in our history,” Kirby said on the earnings call. “From basic economy class, which allows us to profitably compete on price at the lower end, to Polaris on long-haul international flights, United is positioned to give our customers the real choice they want.”
As a result, United is ramping up its international travel operations following strong summer demand that still dwarfs demand for domestic travel. In response to high demand, United has added more routes to Asia and ordered 110 more long-haul jets.
Andrew Nocella, United’s chief commercial officer, said United focused most of its third-quarter growth on international travel, increasing capacity by 22%. He added that the Chicago-based airline’s international profit margins continue to be well above domestic profit margins.
However, with fuel costs rising, airline passengers could expect to pay more for international flights as United tries to keep up with demand. Mike Leskinen, United’s chief financial officer, said fuel was “volatile” and “worked against us in the quarter.”
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These challenges are exacerbated by the war in Israel. In response to the ongoing war, United was one of many airlines to stop flying to Tel Aviv, Israel’s Ben Gurion Airport (TLV), and if service to Israel will remain suspended until the end of 2023, the Chicago-based airline said that this could be the case with a decline in profits in the fourth quarter.
Despite the challenges, United offered a bright outlook for international travel in 2024.
Although the “revenge travel” trend faded after the coronavirus pandemic, United saw big increases, particularly in Asia, and planned to expand capacity in the Asia-Pacific region, according to Nocella. But while transatlantic travel is proving profitable for United, particularly in southern Europe, the airline has no plans for significant transatlantic expansion in 2024.
However, Nocella said United will focus more on international travel, particularly in the second half of the decade.
“We are really optimistic about the international focus,” he said. “We have come a long way. It is very profitable. And there’s a lot more to come.”
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Source : thepointsguy.com