Insights

Summer Recap: Airline Industry Highlights

Air travel has rebounded to near pre-pandemic levels so far this summer. One of the best indicators of the return to the skies can be seen in the latest Transportation Security Administration (TSA) data below, which shows the number of passengers moving through U.S. airports from the start of the pandemic through the last week of July.

Recent TSA Checkpoint Data Has Been Erratic

A lot has happened among some of the major carriers over the last two months. Below we highlight a few significant announcements and industry updates from June and July.

Citi Analyst on Economic Concerns: As reported by Barron’s on June 22, airlines have been facing numerous headwinds lately. These include labor shortages, soaring jet fuel prices, an uneven rebound in business travel and fears of a looming recession. Despite the worrisome landscape, however, one Citi analyst says shareholders could see some relief soon and explains how the market seems “to underappreciate” the strides the sector has made in recent years. Citi analyst Stephen Trent commented that there is “much less risk now embedded in airlines’ operations,” and believes investors have “overlooked wage growth, pent-up demand and relatively low capacity per capita which are relevant factors to consider in today’s domestic airfare strength versus three years ago.”

IATA Revises Profitability Outlook: The International Air Transport Association (IATA) released its updated airline industry forecast in its “Global Outlook for Air Transport” report. The chart below, created by the IATA, shows the evolution of airline industry net post-tax profit figures (from 2007-2022). The IATA revised its 2021 net loss estimate from $52 billion to $42 billion, the report explains, which is a significant improvement compared to the net loss of $138 billion in 2020. For the year 2022, the group is also forecasting industry losses to shrink to $9.7 billion from the $12 billion in losses forecast in October 2021.

AIrline Profitabililty Appeara In SIght After Three Challenging Years

Major U.S. Carriers Report Positive Quarterly Revenue: For the first time since the start of the pandemic, a handful of major U.S.-based airlines are returning to profitability in 2022. Strong demand for air travel and high fares have allowed names like American Airlines and United to overcome rising fuel prices. In its second quarter reporting announcement, Southwest Airlines’ CEO Bob Jordan stated, “We are very pleased to report all-time record quarterly revenues and net income, excluding special items, representing a significant milestone in our pandemic recovery.”

JetBlue Buys Spirit Airlines: JetBlue Airways announced at the end of July that it has reached a $3.8 billion deal to buy Spirit Airlines, reports CNBC. The takeover would create the country’s fifth-largest airline and remove a fast-growing budget carrier from the market. If approved by regulators, JetBlue’s takeover of Spirit would leave Frontier as the largest discount carrier in the U.S.

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