Shifting trends in travel demand bedevil US airlines
Consumers continue to splurge on air tickets. But travel patterns are shifting so often, partly due to work-life changes wrought by the pandemic, that airlines must constantly adapt on booking plane seats and remain cautious in forecasting demand and revenue. That situation can result in lost revenue for the carriers if they guess wrong on the best time to sell seats, while their caution in estimating revenue is taking a toll on their shares as Wall Street interprets that as a sign of slowing consumer demand. American Airlines CFO Devon May attributed the challenge to the difficulty in forecasting demand. For investors, this has raised the risk of confusion. "We're getting better at it, but demand trends are still a little bit different today than they were back in 2019," he told Reuters. Worries about future demand were a reason American Airlines' stock fell 6% on Thursday even after it raised its full-year earnings forecast. Investors were concerned the hike was modest following the company's performance in the second quarter, analysts said. American is not alone in this struggle. In March, United Airlines (UAL.O) had to change its earnings forecast for the first quarter from a profit to a loss because it overestimated demand for business travel in January and February. In the June quarter, United held back seats for summer travel and made them available closer to the peak travel dates at higher fares in a bid to maximize revenue. It was a risky bet as booking data from the previous quarter had shown customers were booking trips well in advance. United's move paid off, helping it generate record quarterly revenue. The company's CCO, Andrew Nocella, said that was another sign that seasonal travel patterns have changed. "The summer peak period is more spread out relative to the past," he said on Thursday on a conference call. Airlines can no longer afford to rely on historical booking data because hybrid or remote work arrangements have allowed customers more flexibility to plan travel, said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2023-07-24/general/shifting-trends-in-travel-demand-bedevil-us-airlines
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Shifting trends in travel demand bedevil US airlines
Consumers continue to splurge on air tickets. But travel patterns are shifting so often, partly due to work-life changes wrought by the pandemic, that airlines must constantly adapt on booking plane seats and remain cautious in forecasting demand and revenue. That situation can result in lost revenue for the carriers if they guess wrong on the best time to sell seats, while their caution in estimating revenue is taking a toll on their shares as Wall Street interprets that as a sign of slowing consumer demand. American Airlines CFO Devon May attributed the challenge to the difficulty in forecasting demand. For investors, this has raised the risk of confusion. "We're getting better at it, but demand trends are still a little bit different today than they were back in 2019," he told Reuters. Worries about future demand were a reason American Airlines' stock fell 6% on Thursday even after it raised its full-year earnings forecast. Investors were concerned the hike was modest following the company's performance in the second quarter, analysts said. American is not alone in this struggle. In March, United Airlines (UAL.O) had to change its earnings forecast for the first quarter from a profit to a loss because it overestimated demand for business travel in January and February. In the June quarter, United held back seats for summer travel and made them available closer to the peak travel dates at higher fares in a bid to maximize revenue. It was a risky bet as booking data from the previous quarter had shown customers were booking trips well in advance. United's move paid off, helping it generate record quarterly revenue. The company's CCO, Andrew Nocella, said that was another sign that seasonal travel patterns have changed. "The summer peak period is more spread out relative to the past," he said on Thursday on a conference call. Airlines can no longer afford to rely on historical booking data because hybrid or remote work arrangements have allowed customers more flexibility to plan travel, said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group.<br/>
