MercoPress. South Atlantic News Agency

Major US airlines cutting back services amid consumer retreat

Major crashes have diminished people's confidence in air travel, resulting in economic losses

Delta Air Lines and United Airlines have announced plans to reduce capacity due to overbuilt summer schedules and other challenges. Delta President Glen Hauenstein stated at a JP Morgan investor conference that the airline will scale back its summer capacity, with specifics to be revealed in its March 22 schedule. United Airlines CEO Scott Kirby said that the airline will retire 21 aircraft early, cut capacity in markets with high government traffic, particularly Canadian destinations, and reduce redeye flights. He also noted that these cuts would primarily occur in unprofitable regions where United is not the leading carrier.

“We had a bias to fly whatever we could as we head into summer,” Hauenstein said Tuesday at a JP Morgan investor conference. “We’ve tempered that down to fly what needs to be flown,” he added.

“From industry level, I expect you will see modest supply changes in the short term,” Kirby said at the same event. “By the time we get to August, every analyst will be writing about capacity cuts.” “Where you see people cutting is the places they’ve lost money,” and where they are not the number one carrier, Kirby further noted.

“When we looked at the quarter as the year ended, the strength that we had as we are closing 2024, we expected to grow revenues 8% over the course of the first quarter,” Delta CEO Ed Bastian pointed out. “The deadliest aircraft incident in almost 25 years caused a lot of shock among our consumers. A whole generation didn’t realize these things could happen,” he also reckoned. “We saw a pretty immediate stall in both corporate bookings, and consumer confidence in air travel started to wane a little bit,” he stressed.

The announcements follow a tough period for the airline industry. Delta revised its first-quarter revenue growth forecast from 8% to 4%, citing factors like severe winter weather in the Southeast, recent high-profile accidents including American Airlines Flight 5342 and Delta Flight 4819, and declining consumer confidence in air travel. These incidents, combined with weaker economic sentiment and fewer close-in bookings, led Delta to lower fares to stimulate demand. However, Bastian remains optimistic, noting that April looks promising while emphasizing that airlines remain a safe investment with strong returns.

Airline stocks fell on the news, with American down 8%, Delta down 7%, and United down 2%. Industry-wide, modest supply changes are expected in the short term, with analysts likely to focus on capacity cuts by August.