US airlines play down demand concerns after United's poor forecast

US carriers on Tuesday (Mar 14) tried to reassure worried investors about the strength of travel demand, a day after United Airlines forecast an unexpected loss in the current quarter.

Delta Air Lines, which reaffirmed its first-quarter outlook, said travel demand is “strong” and getting “stronger.” Its CEO Ed Bastian said in the past 30 days, the airline has recorded 10 highest sales days in its history.

“If anyone’s looking for weakness, don’t look at Delta,” Bastian told JPMorgan’s investor conference.

Speaking at the same conference, American Airlines chief executive Robert Isom said the Texas-based carrier was enjoying a “tremendous” demand.

United forecast on Monday an unexpected loss of between 60 US cents and US$1.00 per share in the current quarter, citing lower demand as well as higher costs from a potential contract deal with pilots. In January, the company had forecast an adjusted profit between 50 US cents and US$1.00 per share for the quarter.

United’s chief executive Scott Kirby attributed the miss to a “bad” forecast, reaffirming the company’s full-year outlook.

Kirby said the “bigger picture” was positive with consumer demand remaining strong. But the comments did little to reassure investors, and United’s shares were down 4 per cent at US$46.87 in morning trade.

“Everyone up here hates that we missed the forecast,” Kirby said. “The bigger picture is the outlook looks really strong.”

Kirby acknowledged that the revision to the original guidance had put a question mark on the credibility of the company’s outlook for the rest of the year.

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United’s total revenue per available seat mile, a proxy for pricing power, is estimated to be up 22 per cent to 23 per cent in the first quarter from a year earlier, slower than the 25 per cent growth expected previously, United said.

The company said its outlook for the second quarter has improved, with total operating revenue now expected to be up in the “mid-teens” versus last year.

“The company is seeing stronger revenue in the peak months and more discounting in off-peak months,” TD Cowen analyst Helane Becker wrote in a note. REUTERS