American Airlines and Delta Air Lines each raised their first-quarter revenue guidance despite volatile fuel prices stemming from the Iran conflict, telling investors Tuesday that demand has remained strong.
The heightened demand is expected to offset nearly $400 million in fuel cost increases.
According to the company, American now forecasts its first-quarter revenue to grow “more than” 10% year over year, up from previous guidance of 7% to 10%. The Fort Worth-based carrier expects it to be the highest year-over-year growth in its history.
“The revenue growth for American in the first quarter is incredibly strong, and we see that progressing as we move throughout the year,” said American Airlines CEO Robert Isom.
Delta Air Lines forecasts first-quarter revenue growth in the high single digits. Like American, the carrier notes accelerating consumer and corporate trends through March and sees strength across main, premium, loyalty, and MRO revenue.
“We’ve seen eight of the top 10 sales days in our history this quarter,” Delta CEO Ed Bastian told CNBC. “Even with the war going on, our revenues, our bookings are up 25% year over year.”
Travelers have rushed to lock in current airfares, anticipating airlines to increase ticket prices in the case that higher jet fuel prices are sustained.
“When prices did spike, we saw a spike in demand,” said Alaska Airlines CEO Ben Minicucci during his airline’s presentation at the Tuesday J.P. Morgan Industrials Conference. “I think people got this initial, ‘Wow, if this thing is going to go crazy, I better book my fare now before fares go up.’”
Some airline executives also suggested that a spike in fuel costs would hurt budget airlines more than airlines focused on loyalty and corporate.
“If fuel prices stay higher for longer, that’s really where it gets interesting,” said United Airlines CEO Scott Kirby. “If it does, it’s going to further accelerate the gap between the brand-loyal airlines and everyone else.”
Featured image by the author.
