US airlines see stronger profits as airfare war ends

U.S. airlines appear to have rediscovered their mojo, thanks to a sharp reduction in capacity that plagued the market this summer. Airfares have turned higher, and airline stocks are now outperforming the broader market. That improvement was one reason why American Airlines lifted its full-year profit forecast. It led to a surprise Q3 profit at Southwest Airlines and has put Delta Air Lines on track to deliver one of the most profitable fourth quarters in its history. The NYSE Arca Airline index has gained 23% in the past three months, outpacing an 8% jump in the S&P 500 index. It's a reversal from this summer when excess supply of seats in the price-sensitive end of the market forced carriers to discount fares to fill their planes, hurting earnings. Airlines have aggressively reduced growth plans since then. Annual domestic seat growth slowed to 1.9% in the current quarter - the lowest rate after the COVID pandemic - from 8.3% a year ago and 6% in the June quarter, according to data from TD Cowen.<br/>