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Airplanes from United and JetBlue and Delta populate the taxiway at Laguardia Airport in the Queens borough of New York City.  Bruce Bennett | Getty Images U.S. airlines are reducing their capacity through the end of the year in a bid to cool an oversupplied domestic market that has led to lower fares and reduced profits despite strong summer travel demand. For passengers, that could mean higher fares are on the way. Over the last week, U.S. airlines had “one of the industry’s largest week-over-week capacity reductions,” shaving almost 1% off of their capacity planned for the fourth quarter, Deutsche Bank said in a note Sunday. Airlines now expect to grow flying about 4% year over year during the final three months of the year. “Despite the sizeable overall reduction, we expect to see further cuts in the weeks ahead as carriers are expected to continue to refine their schedules,” Deutsche Bank airline analyst Michael Linenberg wrote in the note. U.S. airline executives have noted strong demand but a domestic market that’s awash in flights, forcing them to dial back growth plans, which could drive up fares. The latest U.S. inflation report earlier this month showed airfare in June fell 5.1% from a year earlier and 5.7% from May. Reducing capacity could drive up fares for consumers and boost airlines’ bottom lines, if travel demand holds up. Getting fares in the market that are profitable to airlines but palatable to consumers is crucial for the industry as consumers have pulled back on spending in other areas. Stock Chart IconStock chart icon The NYSE Arca Airline Index’s performance compared with the S&P 500. Third-quarter outlooks from Delta and United earlier this month disappointed investors, but their CEOs said they expected capacity pullbacks across the U.S. industry to materialize in August, helping…

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Filed under: News - @ July 30, 2024 6:26 am