Revenge travel runs out of force, hurting airlines’ profit goals

Just as the annual summer vacation gets underway in Europe, airlines in the region are feeling a cold chill wafting over the Atlantic from their US counterparts. On Wednesday, United Airlines Holdings Inc. became the latest carrier cautioning weakening profitability, joining the likes of Alaska Airlines Group Inc. and Delta Air Lines in offering a muted outlook. Airlines have warned of falling ticket prices amid a fare war that’s weighing on their profit, hurting carriers during a time of the year that normally marks an industry peak. Some of that pessimism on display in the US has already taken hold in Europe and beyond. Last week, Deutsche Lufthansa AG cut its profit outlook for the full year and warned that breaking even at its namesake German unit will be challenging. Qatar Airways has cautioned that higher capacity in the market is putting pressure on fares. It’s a reversal from the post-pandemic rush, when ticket prices soared as people splurged on holidays after two years of home confinement, in what was dubbed “revenge travel.” Corporate travel, which typically balances out deal-seeking holidaymakers, also hasn’t rebounded properly post-pandemic, adding more uncertainty to the airlines’ outlooks. As travel trends normalize, and after two years of rising cost of living, people are less willing to pay steep fares go on holiday, and airlines in turn are being forced into discounts to fill extra seat capacity. Adding to the mix in Europe are air-traffic control issues and wage disputes at airlines like Aer Lingus that are creating disruption to schedules and putting people off flying. “The vigorous post-Covid recovery in global demand is now running out of steam,” Oddo BHF analysts Olfa Taamallah and Yan Derocles wrote on Thursday in a note. They cut their ratings on Ryanair Holdings Plc, EasyJet Plc and Lufthansa, saying that more uncertain demand with moderate fare increases and delivery delay issues were behind their adjustments.<br/>