Airline executives predict a record summer and even more demand for first class

Business

Travelers at LaGuardia Airport in New York on June 30, 2022.
Leslie Josephs | CNBC

While the aviation industry has been in the spotlight lately for a host of safety issues, airline executives say there is no sign of slowing demand for flights.

United Airlines “as an airline and as an industry” will carry record numbers of travelers this summer, the carrier’s Chief Commercial Officer Andrew Nocella said on an earnings call Wednesday.

“Demand continues to be strong, and we see a record spring and summer travel season with our 11 highest sales days in our history all occurring this calendar year,” Delta Air Lines CEO Ed Bastian said on his company’s call a week earlier. American Airlines and Southwest Airlines report results on April 25.

Air travel demand has been resilient despite persistent inflation that has weighed on household budgets, as well as a spate of high-profile safety issues that have sparked congressional hearings and have become the butt of jokes from late-night television to TikTok.

Public and regulatory scrutiny of the industry increased after a door plug blew out of a Boeing 737 Max 9 in January. That sparked a new safety crisis for Boeing and slowed its deliveries of new planes to airlines.

United Airlines itself is undergoing a safety review with the Federal Aviation Administration after several incidents this year, including a tire that fell from one of its older Boeing 777s.

Airlines, which make the bulk of their money in the spring and summer, have also been grappling with higher costs of fuel and labor, with fresh contracts giving pilots and other workers large raises after years of stagnant pay.

Nonetheless, demand for international trips and rebounding corporate travel have helped boost global carriers. Both Delta and United’s second-quarter forecasts outpaced Wall Street estimates. Customers appear willing to pay up for first class and other cabins above standard coach, executives said.

Nocella said on the earnings call Wednesday that the airline could further segment the front of the plane, much like United and other airlines have done with coach. “You have many teams of people working on how to further innovate and provide more and more choice and to monetize that choice on our behalf, obviously, in the future,” he said.

Delta, meanwhile, has said premium revenue growth has outpaced sales from standard coach for years.

Delta, United and American have announced upgraded first- and business-class cabins as well as more and larger lounges to accommodate swelling numbers of travelers willing to pay up for higher-priced tickets or elite status or high-fee rewards credit cards.

Delta is slated to open a new, more exclusive tier of airport lounge later this year.

Domestic-focused and low-cost airlines are scheduled to report results in the coming weeks. Some of those carriers have struggled in recent months because of higher capacity, limited airplane availability and higher costs.

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