Issue No. 903

The Demand Party: When Will it End?

U.S. Airlines Continue to Report Red-Hot Booking Strength. How Long Can It Last?

Pushing Back: Inside the Issue

They said it again: Demand remains exceedingly strong. Nearly all U.S. airlines presented to investors last week, sounding universally bullish about the upcoming spring and summer peaks. They talked about elevated yields. They talked about constricted supply. They talked about industry revenues as a percentage of GDP still far below trend. But they also talked—with less cheerfulness—about spiking labor costs.

Mostly unmentioned was another worry: Gathering storm clouds threatening the economy. Airlines across the world are watching closely as financial systems come under stress, evoking painful memories of 2008. There is however one silver lining to economic distress—oil prices dropped sharply last week.

Cheaper oil isn’t good news for Saudi Arabia. But the Kingdom’s oil riches from 2022 are more than sufficient to start a new airline. So that’s what it’s doing. Riyadh Air will join Jeddah-based Saudia in attempting to replicate the aviation miracle that Emirates achieved in Dubai. Both carriers, incidentally, gave Boeing some new business.

Latam’s business is going pretty well, post-bankruptcy. Business for Turkey’s Pegasus Airlines is going extremely well, post-pandemic. All Nippon has more details about Air Japan. WestJet and Sunwing look set to complete their merger. Airlines and lessors are getting more vocal about their delivery and engine frustrations. And don’t look now, but it’s almost April, which means the second quarter is in its final throes. The last big group yet to report Q2 earnings: China’s major airlines. Stay tuned for that.    

Airline Weekly Lounge Podcast

U.S. airlines presented at a major investor event in New York last week. What did they say? Plus, a look at an airline in the Philippines with a very unique business model... and a very unique aircraft configuration. Listen to this week’s episode to find out. A full archive of the Lounge is here.

Weekly Skies

Latam, South America’s largest airline group, reported a solid if unspectacular 8 percent operating margin for the fourth quarter of 2022. The company, operating under bankruptcy protection from 2020 until last November, earned a 12 percent operating margin in the fourth quarter of 2019.

State of the Unions

American Airlines pilots say they are mystified that CEO Robert Isom publicly promised a Delta-level contract when the carrier had not made such a proposal to union negotiators. But with negotiations ongoing, the airline indicated a proposal is close.

Feature Story

It’s like that bunny in the old Energizer battery commercials: Still going.  

By the Numbers

Note the variance in Q4 jet fuel prices paid by different airlines, a topic that came up a few times during the JPMorgan investor event last week. Some carriers like JetBlue are more exposed to the current elevation in New…