Airline shares slide regardless of CEOs’ optimistic demand outlook

A JetBlue airplane at Ronald Reagan Washington National Airport in Arlington, Virginia on March 9, 2023.

Stefanie Reynolds | AFP | Getty Images

Airline stocks fell on Wednesday as the market fell across the board on worries about the health of some banks and new data showing a slowdown in consumer spending.

The NYSE Arca Airline Index, which includes mostly U.S. airlines, was down about 6% on Wednesday afternoon and was on course for its biggest one-day percentage decline since last June. It surpassed a drop in the S&P500.

Airlines executives said during a JPMorgan industry conference on Tuesday that despite higher costs, they expect strong demand — and profits — in 2023, with leisure travel continuing to lead. Consumer appetite for air travel has increased sharply over the past year, and higher fares have boosted airline profits.

However, the airlines also pointed to near-term problems such as higher spending on fuel and labour. United Airlines on Monday forecast a first-quarter loss on a potential new pilot deal and weaker-than-expected demand earlier this year, traditionally a weak travel season.

Some executives said lucrative business travel is shifting due to more hybrid work models that allow customers to combine work travel with leisure rather than using more traditional schedules.

“I think business travel has changed”, JetBlue Airways CEO Robin Hayes said at the conference. “Those day trips where you used to get up at 6 a.m. and be back by 8 p.m. … you just don’t do that anymore.”

Hayes said that means shifts in the network.

“We came in with 15 Boston LaGuardias because we thought it was a great idea. As it turns out, it wasn’t,” he said. “And that’s going to be nine or ten now as we get later in the year.”

Delta Airlines CEO Ed Bastian said business travel has recovered more than 80% of pre-pandemic levels.

“As I tell many of my CEO friends in and out of the industry, I know where your people are. They may not be in the office, but you can find them on my planes,” he said at the conference. “And that’s because of the new way of working, the new hybrid, the new mobility. And I don’t think that’s going to change.”