Brad Stone discusses Bloomberg Businessweek's interview with former President Donald Trump, Neil Sipes talks about BlackRock earnings, Nathan Dean explores U.S election research, Craig Trudell delves into Tesla's plan to hire 800 new employees, and Alison Williams provides insights on U.S bank earnings.
United Airlines warns of overcapacity affecting third-quarter profits, emphasizing the struggle to fill airplanes at desired price points.
Reduced business travel post-pandemic impacts revenue diversification for airlines like United, highlighting the challenge in optimizing capacity.
Deep dives
United Airlines Reports Strong Travel Demand but Warns of Price Cuts Impacting Industry
United Airlines reported a strong second-quarter profit due to robust travel demand, but they caution that third-quarter profit might fall short due to price cuts by low-cost carriers affecting the entire airline industry. The warning highlights the negative impact of overcapacity in the industry, revealing the struggle to fill airplanes at desired price points. United confirmed that steps are being taken to address the overcapacity issue, such as reducing capacity growth after mid-August.
Efforts to Reduce Overcapacity in the Airline Industry
Airlines like United and Alaska are taking steps to reduce overcapacity by adding premium seating to flights. Additionally, airlines like Frontier are implementing measures like blocking middle seats to lessen capacity. The need for airlines to park airplanes and reduce overall capacity remains crucial to restore pricing power and improve profitability in the industry.
Challenges in Managing Capacity and Competition in the Airline Market
Despite efforts to reduce overcapacity, challenges persist in the airline market with fast-growing low-cost carriers and upstarts entering the industry. The competition from low-cost carriers like Frontier, Spirit, and JetBlue poses challenges in managing capacity levels. While innovative routes and new entrants contribute to the dynamism of the industry, effectively aligning capacity with demand remains a key challenge for airlines.
Impact of Business Travel on Airline Revenue and Capacity
The impact of reduced business travel is significant for airlines like United, where business travel remains below pre-pandemic levels, affecting revenue diversification and capacity utilization. Business travel plays a crucial role in diversifying routes and destinations for airlines. The slower recovery of business travel compared to leisure travel poses challenges in optimizing capacity and revenue streams for airlines.
On this week’s podcast: Neil Sipes, Bloomberg Intelligence Financials Analyst, discusses BlackRock earnings. Brad Stone, Bloomberg Businessweek Editor, talks about Bloomberg Businessweek's interview with former President Donald Trump. Nathan Dean, Bloomberg Intelligence Senior Policy Analyst, discusses recent U.S election research. Craig Trudell, Bloomberg Global Autos Editor, discusses Tesla looking to hire nearly 800 new employees. Alison Williams, Bloomberg Intelligence Senior Analyst, Global Banks and Asset Managers, discusses U.S bank earnings. George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, and Airlines Analyst, talks United Airlines earnings.
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