Major US airlines trim capacity as oil price rise makes itself felt

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US carriers United Airlines, JetBlue (JBLU), Delta and Southwest have slightly lowered capacity plans amid rising oil prices but have said that travel demand is still robust.  

Low-cost carrier Southwest Airlines (LUV), however, said its fuel hedges would help to protect it more than its rivals.  

The carriers all provided updates on current trading as part of a conference hosted by JP Morgan on March 15, 2022.  

“Given the significant rise in fuel costs, JetBlue (JBLU) has moderated its capacity plan for the first quarter of 2022,” it announced in a stock exchange filing.  

The carrier said it now expects capacity for the first quarter to be down approximately 1% compared to the same quarter in 2019. It had previously expected a decline of between 1% and an increase of 3%.  

“JetBlue (JBLU) is moving swiftly to reduce May capacity by 6-8 percentage points, and expects to continue to moderate its capacity outlook into the summer months,” it added.  

United Airlines said cancellations related to Omicron and the current political crisis in Ukraine mean it now expects first quarter 2022 capacity to be down approximately 19% versus the first quarter of 2019, below previous guidance of down between 16% and 18%. 

“In response to several macroeconomic factors including rising fuel prices as well as expected aircraft delivery delays, the company has reduced its total capacity plan for the full year 2022 to be down in the high single digits versus full year 2019,” United added in a stock market filing. 

Delta said it now expects first quarter capacity to be around 83% of 2019, compared with an initial prediction for 83-85%.  

Southwest, which cut its schedules in January due to staffing issues, said it expects first quarter capacity to be down 9-10% compared with 2019, against a previous estimate for a decline of 9%. 

“The company continues to estimate full year 2022 capacity to be down approximately 4% compared with 2019,” it confirmed. 

However, all four carriers said demand remained good and provided positive revenue outlooks. That’s in spite of increasing fuel prices.  

United Airlines said that, since the peak of the Omicron wave of COVID-19 infections, demand for travel has exceeded its expectations and it expects revenue in the first quarter to be at the better end of its guidance. The carrier had previously said it expects Q1 revenue to be between 20% and 25% lower compared with the first quarter of 2019.  

United said it now expects the fuel price per gallon to be approximately $2.99 for first quarter 2022, rising to $3.50 in the second quarter. 

Meanwhile, Delta said in a presentation it was seeing good travel demand with revenue in the first quarter now predicted to be approximately 78% of 2019 levels, in comparison with a previous estimate of 72-76%. 

Delta commented that it expects “a solid pre-tax profit in the month of March as higher fuel cost is offset by stronger revenue”. It now expects a first quarter fuel price of $2.80 per gallon, compared with a previous expectation for $2.35 – $2.50.  

JetBlue (JBLU) said its first quarter revenue was better than expected thanks to strong demand. It therefore now expects revenue to be down by between 6-9% when compared with 2019, against previous expectations for a decline to 11-16%. 

JetBlue (JBLU), which says it has not entered any fuel hedges for the first quarter, said it expects an average all-in price per gallon of fuel of $2.89 in the first quarter of 2022. 

Southwest said current leisure revenue trends for spring break travel are strong and above 2019 levels. It continues to expect a net loss in the first quarter, but expects to be profitable in March and for the final three quarters of the year.   

Southwest said it expects fuel hedging cash settlement gains per gallon of $0.52 in the first quarter, compared with a previous estimation for $0.35.  

“The company believes it is currently in an advantaged position within the U.S. airline industry due to its balance sheet strength, net cash position, and significant fuel hedging protection,” it added.  


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