After a difficult few quarters that saw airline profit margins fall to post-pandemic lows, airlines in the United States
appear to have seen their financial situations improve for the better. Airlines this past summer were forced to cut back significantly, to ensure that their planes were full and that they attained some form of profitability.

As a result of this capacity reduction, airline per-passenger costs have fallen significantly and airfares have started to rise significantly, amid a reduction in supply that has put upward pressure on prices. Airline stocks have also been outperforming the broader market in recent weeks, after lagging behind the S&P 500 for the majority of 2024.

Commercial

All major airlines are seeing surprisingly good financial results

Airlines have begun to publicly recognize their changing fortunes, with American Airlines, an airline that has long been struggling to keep up with competitors Delta and United, raising its full-year profitability forecast last week, according to reports from Reuters. Southwest Airlines, an airline that has been the center of a power struggle for months between the existing management team and activist hedge fund Elliott Management, appears to have its feet back on solid ground, with new Elliott-approved board members joining the company just as it announced an unexpected profit in the third quarter.

The industry’s heavy hitters are also back on top, and doing better than ever, with airlines performing better than ever despite available seat capacity now growing at its slowest pace in the post-pandemic era. Delta Air Lines has capitalized on these changing market conditions, and now projects one of the most profitable fourth quarters in company history.

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The carrier unquestionably took a hit to its third-quarter performance, but does not expect it to make a major dent in its full-year earnings.

United Airlines has also been doing well financially, with the company’s shares rising a mindboggling 100% since the beginning of August 2024, bringing the stock price up to its highest value since the beginning of the COVID-19 pandemic. Even JetBlue, which has been struck by extensive issues since its failed attempt to merge with Spirit Airlines, appears to be on the road to profitability, with earnings for the most recent quarter beating out analysts’ expectations, according to Barron’s.

Some airlines, such as Frontier, have received the market’s confidence following significant organizational changes. The airline’s stock has risen nearly 120% since mid-August, largely due to its decision to revise pricing models and significantly reduce capacity. Additionally, Frontier plans to sell off older aircraft in the secondary market.

Structural issues affecting the industry have also begun to shift in airlines’ favor

Carriers have struggled in recent months with manufacturer delays and other issues related to grounded aircraft, problems which have become far less critical when airlines begin reducing capacity and cutting routes. Additionally, airlines have also been able to lower their operational costs over the summer, with energy prices taking a roughly 20% dive between July and September.

Aircraft refueling shutterstock_1259661907

Photo: santi lumubol | Shutterstock

As a result, airlines across the United States have begun to see lower unit costs, higher load factors, and dependably appealing ticket prices. While one may argue that the consumer has been harmed by these recent developments, airlines are certainly enjoying this oasis of calm in what has so far been a half-decade of financial uncertainty.

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