Oct 16, 2019
United, Delta see booming travel demand bucking slowdown fears
United Airlines Holdings Inc. sees robust U.S. travel demand extending into the winter, offering an economic bright spot amid signs of a slowdown.
“I’ve never seen a bigger disconnect between the global headlines in terms of the economy and its potential impact on travel, and then the numbers I see here at United” in terms of future sales, United Chief Commercial Officer Andrew Nocella said Wednesday.
Nocella’s upbeat view, which he shared with investors on a conference call to discuss earnings, echoed that of Ed Bastian, chief executive officer of Delta Air Lines Inc. Bastian last week predicted a robust holiday travel season and said U.S. consumers are “doing quite well.”
Other economic signals are more worrisome. U.S. retail sales slipped in September, the first decline since February, the Commerce Department said Wednesday in a report that stoked concerns about consumer spending. The Bloomberg Economics recession tracker sees a 27 per cent chance of a recession over the next 12 months.
The U.S. Federal Reserve has trimmed interest rates at its last two confabs as it tries to cushion the economy from weak global growth and trade-policy uncertainty. After the retail sales report, traders in federal funds futures increased bets that the central bank will reduce rates again at its Oct. 29-30 meeting.
An economic slowdown would eventually catch up to airlines, but the companies are showing little sign of weakness at the moment. United’s load factor, a measure of how full its planes are, was 86.1 per cent in the third quarter. Its year-to-date average is higher than in 2018, buoyed in part by the grounding of the Boeing Co. 737 Max, which has squeezed seating capacity at U.S. airlines. Delta has also been flying fuller planes.
United raised its 2019 profit forecast and said it was “ahead of pace” to meet next year’s earnings target. The shares climbed 2.7 per cent to US$90.23 at 1:36 p.m. in New York. Delta fell 0.2 per cent to US$53.54.
American Airlines Group Inc. and Southwest Airlines Co. report third-quarter results next week.