However, the presence of empty seats on routes to Asia is adversely affecting profit margins, and a complete return of flights between the U.S. and China is still a distant prospect.
US Airlines Asia-Pacific Operations
United Airlines Chief Commercial Officer Andrew Nocella emphasized the goal of ensuring that the Asia Pacific division generates profit margins comparable to the rest of the global network during an earnings call this week. Nocella expressed optimism about the future outlook for Asia.
The major U.S. international carriers, including Delta Air Lines (DL), United Airlines (UA), and American Airlines (AA), reported robust fourth-quarter earnings in 2023, contributing to another successful year for the travel industry amid the ongoing recovery from the post-pandemic travel surge.
American Airlines announced a $19 million profit for the fourth quarter, surpassing Wall Street expectations, despite a significant decrease from the previous year due to costs associated with a new labor agreement. The full-year profit reached $822 million, with record revenue of $53 billion, leading to nearly a 10% increase in American Airlines shares on the day of the announcement.
United Airlines reported a fourth-quarter profit decline despite a 10% increase in revenue. However, the full-year profit more than tripled to $2.6 billion, leading to a notable surge in United Airlines stock following the results, with a gain of over 7% in the past week.
Delta Air Lines experienced a more than twofold increase in profit for the December quarter compared to the previous year, with full-year profit surpassing $4.6 billion. Nevertheless, Delta adjusted its 2024 profit outlook, resulting in a stock sell-off and leaving shares down over 5% since its earnings call earlier this month.
The Asia Pacific region continues to be the primary source of revenue and capacity growth for U.S. carriers. However, the recovery in this region has been slower compared to domestic and transatlantic routes. The addition of more capacity, however, has led to diminishing yields on flights to Asia as demand struggles to keep pace with supply.
According to Delta President Glen Hauenstein during the earnings call on January 12, the Pacific region, despite having significant capacity, is witnessing absorption, and there is an expectation for this trend to turn positive as growth rates decrease throughout the year.
In the fourth quarter, revenue growth in the Pacific region was the highest among U.S. airlines, with a 45% increase for Delta, 61% for United, and 53% for American. The capacity, measured by available seat miles, also saw a sharp rise in the region.
However, when considering capacity-adjusted passenger revenue, the performance was either flat or down for each airline. Notably, United, with the largest Pacific footprint among U.S. airlines, experienced a nearly 12% decline in capacity-adjusted passenger revenue despite an 82% increase in available seat miles.
Yet to Touch Pre-Pandemic Levels
A significant resumption of routes between the U.S. and China has not accompanied the increase in flight capacity in Asia.
According to data from aviation company Cirium, there are approximately 70 weekly flights between the U.S. and China, which is double the number operating before the agreement to increase weekly flight operations in October. However, it is still considerably lower than the more than 300 weekly flights in 2019.
United had initially reintroduced several daily flights to China in the fourth quarter, with more scheduled for early 2024. However, these flights have been removed from the schedule, as indicated by Cirium data.
Andrew Nocella of United expressed optimism about the future of Asia, especially as more China flights come back online, despite acknowledging potential adjustments in flight schedules.
Meanwhile, Delta resumed service to Osaka, launched new routes to Hong Kong and Tokyo, initiated the first non-stop service from the continental U.S. to Manila, and announced a new daily flight between Seattle and Taipei starting in June.
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