A United Airlines, which achieved a net profit of US$1,3 billion in the second quarter of 2024, plans to optimize its capacity in the coming months. The company's CEO believes that a reduction in overall industry capacity will also result in higher airfares.
The CEO of United Airlines, Scott Kirby, believes airfares could soar in the coming months as airlines are likely to reduce capacity to meet enger demand.
Without a doubt, the recovery in air travel is evident as millions of engers have returned to flying post-COVID. Airlines, in an attempt to meet this growing demand, have expanded their services aggressively, which has resulted in lower airfares and even excess capacity, with some carriers unable to fill all seats on certain routes.
According to Kirby, US airlines should begin a course correction in the coming months to avoid unprofitable operations on certain domestic routes, reducing capacity and thus increasing ticket prices.
During a recent earnings call, Kirby mentioned that the airline revenue-to-GDP ratio should recover. He reviewed the historical trend and pointed out that this relationship declined as capacity exceeded demand. Kirby expects airlines to adjust their operations to better match existing demand.
“It was always inevitable that carriers would start canceling these unprofitable flights and you see this happening in earnest in the second half of August on schedules. As a result, it appears that domestic industry capacity growth will moderate by about 5 points through Q2025 compared to where we were in QXNUMX, which should provide a constructive setup as we close out the year and a particularly beneficial backdrop in towards XNUMX.”
Kirby acknowledged United's recent strong performance but said absolute results are all that really matter. He added that the results are solid now, “But I can already see the impact that schedule changes are having on our advanced reserves and yields as we reach the industry capacity inflection point in mid-August.”
United revealed its financial results for the second quarter of 2024, indicating transport of 44,3 million engers. Operating income totaled US$15 billion, with pre-tax profit of US$1,74 billion and net profit of US$1,32 billion.
Kirby also said the carrier efficiently managed costs, cash and capacity in a challenging industry environment and that United is focused on achieving its financial goals.
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