US airlines keep adding seats they can’t get anyone to fill

A record 30m people are expected to catch a flight over the Thanksgiving holiday, but airlines that specialize in low-cost US travel still don’t have much of a reason to celebrate. Spirit Airlines, Southwest and other domestic-focused carriers are slashing their already low prices. After pandemic-related lockdowns ended, budget domestic airlines bolstered their supply of seats to accommodate a massive influx of travelers in 2022. But these days they’re often empty because passengers are gravitating toward more-expensive, internationally focused competitors. As a result, domestic-focused carriers, a group that also includes Frontier Group Holdings Inc. and JetBlue Airways Corp., are expected to struggle financially in 2024 and possibly 2025, analysts say. Those companies have already had a hard year. They’ve been battered by grounded or delayed aircraft, rising labor costs, volatile fuel prices, and congestion magnified by a shortage of air traffic controllers that’s affecting the whole industry. “I get a fare sale promotion, like, four times a day now,” Conor Cunningham, a Melius Research analyst, said. “It’s insane.” Domestic air fares for Thanksgiving have averaged $266 round trip, down 7% from 2022 and below pre-pandemic 2019, according to booking app Hopper Inc. Tickets for Christmas are at $324, down 12% from 2022 and 10% under 2019. Average domestic round-trip fares have declined year-over-year each month from April through October, based on US travel agency ticket sales, according to ARC Corp. Low-cost US airlines aren’t done building out their capacity. Believing a post-lockdown travel boom would last — as it has in the long-haul international and premium travel market — domestic carriers ratcheted up expansion plans already in the works. So the supply-demand mismatch could worsen if their main customers, budget travelers, remain home. The combined domestic fleet of single-aisle planes and regional jets is scheduled to expand 18% to about 5,000 aircraft in 2025 from 4,247 at the end of 2022, according to Jefferies Financial Group. That’s a 22% increase in the number of domestic seats, compared with about 4% expected growth in air traffic over the period. “Clearly that’s going to exasperate the issues,” said Sheila Kahyaoglu, a Jefferies analyst. “And costs are increasing, whether labor agreements — labor is 30% of airline costs — or maintenance costs spread over potentially less aircraft” due to engine manufacturing problems, constrained parts and delivery delays.<br/>