FORT WORTH, Texas – The CEO of American Airlines says travel demand is still strong and he is not worried about airlines adding so many flights that they will drive down prices.
American Airlines Group Inc. CEO Doug Parker said Tuesday that airlines can charge profitable fares even as they add seats, which is different than in past years, when they were losing money.
Parker’s upbeat tone contrasted with comments from Air France-KLM, which lowered its 2014 earnings forecast because overcapacity on international flying is hurting profits. Last month, Deutsche Lufthansa AG issued a similar warning.
American is expected to release June traffic figures this week. Parker declined to say what the statistics will show, but he said, “We’re happy with the demand we are seeing for the product throughout the world.” He dismissed the idea that there might be too much capacity on key routes, such as between the U.S. and Europe.
“There happens to be some growth internationally from a number of carriers, including American Airlines, in response to increased demand,” he said. “That’s what should happen.”
In the past, airlines struggled when jet fuel prices rose or overcapacity caused a drop in the average fare per mile, called yield. Most carriers are profitable now despite fuel prices which are high by historical measures, and that is partly because they have been successful at controlling the number of seats and preventing prices from falling.
American, which owns US Airways, earned $480 million in the first quarter. Analysts expect net income to top $1.2 billion for the second quarter, according to a survey by FactSet.
“The airline is doing very well,” Parker said. “We expect to continue to do very well.”
Parker made the comments after a ground-breaking ceremony for a new flight operations centre, the first new building at American’s headquarters complex in more than 20 years. The centre will house employees who co-ordinate and track flights.
American Airlines shares were down 36 cents at $39.74 in midafternoon trading. The shares, which started trading after the December merger with US Airways, began the day up 59 per cent in 2014.