Travel demand in the United States has surged back after a dip caused by the Omicron strain, and it will continue to be strong enough to help carriers overcome an increase in fuel costs with higher rates, according to statements from various airlines.
Delta Airlines Inc, located in Atlanta, said it was seeing “unprecedented” rise in demand, resulting in the largest ticket sales in the company’s history last week.
“We’ve not seen a stronger demand … in my career,” Chief Executive Ed Bastian of Delta Airlines said.
Rivals United Airlines Holdings and American Airlines both stated that demand is at an all-time high. In a hopeful indication for the industry, United said that corporate traffic is recovering faster than predicted.
“While Russia’s invasion of Ukraine has prompted the suspension of wide sections of airspace, Delta’s bookings for flights to Europe have not been affected”, according to Bastian.
Similarly, JetBlue CEO Robin Hayes stated that the airline is experiencing a “fantastic” comeback in travel demand between the United States and the United Kingdom.
In afternoon trade, the NYSE Arca Airline index was up roughly 4%, led by advances in Delta, American Airlines, and United Airlines shares.
Fuel is their second-largest expenditure after labor, yet unlike most European airlines, many U.S. airlines do not hedge against unpredictable oil prices. Typically, the industry seeks to balance fuel costs with increased rates.
Delta has stated that to meet the fuel expenses, ticket rates must be raised by around 10% each trip. It plans to do so in the second quarter.
Investors are concerned about the possible impact of rising fuel prices on the airline sector, which has spent the last two years attempting to recover from the slowdown triggered by COVID-19. However, leaders in the business disregarded those worries.
“We can make money at oil prices of $100 a barrel or higher, and we will,” said Chief Executive of American Airlines Doug Parker. Delta’s Bastian said he was not at “a point of nervousness” about rising oil prices.