This year has only just begun, but it is already taking shape for US airlines.
After several setbacks, the industry ended 2024 in a fairly strong position due to healthy demand for tickets and the ability of several airlines to control costs and increase fares, experts said. Barring any major problems, airlines – especially the largest ones – should have a great year, analysts said.
“I think it's going to be pretty blue sky,” said Tom Fitzgerald, an aviation industry analyst at investment bank TD Cowen.
In recent weeks, many major airlines have upgraded their forecasts for the all-important final three months of the year. And on Friday, Delta Air Lines said it collected more than $15.5 billion in revenue in the fourth quarter of 2024, a record.
“As we move into 2025, we expect strong travel demand to continue,” Delta CEO Ed Bastian said in a statement. That put the airline on track to have “the best financial year in Delta's 100-year history,” he said.
The airline also beat analysts' profit expectations and expected earnings per share, a measure of profitability, to rise more than 10 percent this year.
Delta's upbeat report provides a preview of what is expected to be similarly rosy updates from other airlines reporting earnings in the coming weeks. That should be welcome news for an industry that has been held back by several challenges, even as demand for travel has skyrocketed after the pandemic.
“For the past five years, it felt like every bird in the sky was a black swan,” said Ravi Shanker, an aviation analyst at Morgan Stanley. “But it seems like this industry has its ducks in a row.”
That is, if everything goes according to plan, which is rarely the case. Geopolitics, terrorist attacks, aviation safety issues and, perhaps most importantly, an economic downturn could reduce demand for travel. Rising costs, especially for jet fuel, could erode profits. Or the industry could face issues such as supply chain disruption that limits the availability of new aircraft or makes it more difficult to repair older planes.
Early last year, a panel blew off a Boeing 737 Max during an Alaska Airlines flight, reigniting safety concerns about the manufacturer's planes, which are used on most U.S. airline flights, Cirium said. an aviation data company.
The incident forced Boeing to slow production and delay deliveries of jetliners. That disrupted the plans of some airlines that hoped to carry more passengers. And there was little airlines could do to adapt because the world's largest aircraft manufacturer, Airbus, did not have the capacity to pick up the slack; both Boeing and Boeing have long order books. In addition, some Airbus planes suffered from an engine problem, forcing airlines to take the planes out of service for inspections.
There was other commotion too. Spirit Airlines has filed for bankruptcy. A brief technological glitch wreaked havoc on many airlines, disrupting travel and resulting in thousands of canceled flights in the middle of the busy summer season. And over the summer, smaller airlines flooded popular domestic routes with seats, squeezing profits during what is normally the most lucrative time of year.
But the industry's financial position began to improve as airlines reduced the number of flights and seats. While that was bad for travelers, it increased fares and profits for airlines.
“You have an imbalance between supply and demand, which gives the industry pricing power,” said Andrew Didora, an analyst at Bank of America.
At the same time, airlines are trying to improve their operations. American Airlines has overhauled a sales strategy that had frustrated corporate customers, allowing it to win back some travelers. Southwest Airlines has made changes aimed at cutting costs and boosting profits after a boost from hedge fund Elliott Management. And JetBlue Airways unveiled a strategy with similar goals after a less contentious battle with investor Carl C. Icahn.
These improvements and industry trends, along with the stabilization of fuel, labor and other costs, have created the conditions for what could be a standard-bearer of 2025. “All of this is the best setup we've had in decades,” Mr. Shanker said. .
However, that will not immediately become a reality. In winter, travel demand is generally moderate. But business travel is picking up, thanks to events like this week's Consumer Electronics Show in Las Vegas.
The positive outlook for 2025 is likely strongest for the largest US airlines: Delta, United and American. All three are well positioned to benefit from booming trends, including steadily picking up business travel and customers eager to spend more on better seats and international flights.
But some smaller airlines can also do well. JetBlue, Alaska Airlines and others have added more premium seats, which should help boost profits.
While generally optimistic, Mr Shanker acknowledged the sector was vulnerable to a host of potential problems.
“I mean, this time last year you were talking about doors falling off airplanes,” he said. “So who knows what could happen.”
