Growth of US low-cost airlines slows due to lower demand

The american airlines of low cost They are slowing capacity growth to protect their pricing power in the face of weakening domestic travel demand.

At the same time, rising labor and fuel expenses, along with problems with aircraft engines, are driving up their costs and eating into their profits, they said Thursday.

Southwest Airlines, the country’s largest airline, now expects year-over-year capacity growth in the January-March quarter to be between 10% and 12%, down from its previous estimate of 14% to 16%.

It has also reduced its capacity growth plans for 2024 to better align with current demand trends.

The Dallas-based company said that while global travel demand remains stable, it has experienced lower-than-expected bookings in both August and September.

For its part, the low-cost airline Spirit Airlines stated that it is evaluating its growth profile in light of the decline in demand. “Unfortunately, we have not seen the expected return to a normal environment of demand and prices for the holiday periods.”he declared.

The company, which is based in Florida, has forecast annual capacity growth of 7% in the March 2024 quarter, lower than the estimated growth of 14% in the current quarter.

Your rival Frontier Airlines It did not provide an estimate for the first quarter, but its capacity growth in the current quarter is expected to be up to 9 percentage points less than a quarter ago.

The actions of southwest and Spirit were down 2% and 4%, respectively. Frontier’s rose 4%.

Analysts have called on airlines to reduce capacity to protect their pricing power. In the third quarter, the companies increased their capacity in the US domestic market by 10% compared to the previous year and anticipate a 9% increase in the current quarter.

Savi Syth, airline analyst at Raymond James, called the capacity adjustments “favorable for future price trends”.

The airline sector has been banking on robust demand to mitigate inflationary pressure with higher ticket prices.

Airfares, however, have been in double-digit decline for five consecutive months compared to the previous year. Ticket prices for the upcoming Thanksgiving weekend have also dropped, according to data from the travel website Kayak.

Meanwhile, crude oil shortages and rising labor rates are driving up fuel prices and wages. Southwest expects costs to rise next year.