Summer travel boom not enough to fire up airline earnings

Record summer travel demand was tipped to translate into bumper earnings for airlines - but quarterly reports are looking less than stellar.<br/>While plenty of customers are flocking to travel destinations worldwide, airlines are finding an excess supply of seats in the price-sensitive end of the market has forced them to discount fares to fill their planes.<br/>This week, earnings from American and Southwest Airlines are expected to deliver more bad news following downbeat outlooks for the quarter from United, Delta, Alaska Airlines, and Ryanair. Airline executives attributed the overcapacity to an overoptimistic view of travel demand, which by most standards has been robust. Passenger traffic in the U.S. is hitting records levels this year. In the first six months, the U.S. TSA screened an average of about 2.46m airline passengers per day, up 6% from last year. "It was just that airlines were hoping that it (demand) was going to be even stronger," Alaska's CFO Shane Tackett said in an interview. In addition to the discounting pressure, new labor contracts and higher lease rates and maintenance costs have driven up the industry's operating expenses. In May, American slashed its second-quarter profit forecast, citing weaker pricing power in the domestic market, and while the Texas-based carrier has vowed a reboot, analysts say reversing course will be time-consuming and costly. "American's network leaves it more exposed to the markets currently most oversupplied and less able to offset the higher cost environment," said TD Cowen analyst Thomas Fitzgerald.<br/>