Economic worries loom over US airline earnings

US carriers including American Airlines Group and United Airlines Holdings are enjoying the strongest consumer demand in three years, but analysts and investors question how soon the good times might end as the growing risk of economic recession sparks worries about travel spending. As earnings season starts on Thursday, investors are looking to find out how carriers plan to offset higher costs and protect profit once consumer demand softens. The airline industry, which is facing higher fuel and wage bills, has been relying on robust demand to mitigate inflationary pressure with higher fares. American Airlines on Tuesday forecast stronger profit in the third quarter as it expects higher ticket prices to offset a run-up in operating costs. The Texas-based carrier, however, did not provide any commentary on the booking trends. Airline fares were up 33% year-on-year in August and have been one of the biggest contributors to a jump in US consumer prices. With the Federal Reserve aggressively raising interest rates to tame inflation by lowering demand and slowing economic growth, the industry's pricing power is under threat. Analysts at Jefferies expect a sharp slowdown in the industry's revenue next year. "We struggle to get positive on a pricing story when the Fed is actively targeting airline fares as a component of inflation," they said in a note.<br/>