Travel demand strong, but U.S. carriers fret over aircraft delivery delays

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CHICAGO (Reuters) -U.S. carriers expect strong profit in the current quarter as travel spending remains strong, but delays in aircraft deliveries and staffing shortages are hampering their efforts to fully capitalize on consumer demand.

Several U.S. operators including American Airlines (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV) noted that delays in Boeing (NYSE:BA)’s aircraft deliveries could hurt in coming months. Travel has remained robust even as rising inflation is making leisure activities more expensive.

American Airlines, which forecast a higher-than-expected profit for the second quarter, expects to receive 20 planes from Boeing in the remainder of this year. CEO Robert Isom said the carrier is concerned about potential delays impacting its summer schedule.

“I communicate very frequently with the Boeing senior management team,” he said. “And we need them to get their act together.”

Southwest Airlines on Thursday trimmed its capacity growth plans, citing Boeing’s aircraft delivery delays. It now expects 70 deliveries of the 737-8 jet this year instead of the planned 90 after the U.S. planemaker disclosed a manufacturing issue with some of the workhorse aircraft.

The Dallas-based airline, one of the biggest customers of MAX planes, now expects its capacity in the December quarter, a busy holiday travel period, to be as much as 7 percentage points lower than last year.

“Based on the recent production issues at Boeing, we feel it’s prudent to have a more conservative planning assumption,” Southwest’s CFO Tammy Romo told analysts.

Fewer aircraft deliveries will also slow down its plan to reduce non-fuel operating costs this year, the airline said.

Southwest’s shares were down about 5% in afternoon trade.


Boeing declined to comment. The company said on Wednesday that it expects deliveries of its 737 aircraft to slow down in the second quarter. CEO Dave Calhoun said that the timing of the shortfalls “will impact summer capacities for many of our customers. We feel terrible about that.”

Similarly, ultra-low-cost carrier Spirit Airlines (NYSE:SAVE) on Wednesday said issues related to jet engine availability and pilot attrition are not letting it add more flights.

Filling up planes with passengers, however, is not a problem for now. Southwest said it expects “solid” profit in the June quarter on strong summer bookings.

“Travel demand remained strong thus far, but we remain mindful of the uncertain economic environment,” Southwest’s CEO Bob Jordan said.

Rivals Delta Air Lines (NYSE:DAL) and United Airlines have also offered an upbeat outlook for summer travel.

Rising interest rates, high inflation, mounting job losses and turmoil in the banking industry have fueled concern about the strength of consumer spending, which has allowed carriers to mitigate higher labor and fuel costs.

Some analysts are not sure the travel boom will last long. But airlines say demand remains resilient, with bookings for international trips outpacing those for domestic travel.

American plans to ramp up its long-haul international capacity by 82% in the current quarter from a year ago.

“We have a strong demand environment this summer, and we’re highly confident that, that will continue going forward,” American’s Isom said.