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Aug. 8 (UPI) -- Many U.S. airlines are losing money amid competition for passengers, which is causing several to reduce their numbers of flights to raise the cost of passenger airfares. Budget airlines in particular are suspending or permanently cutting unprofitable air routes to help stave off operating losses due to overcapacity on those serviced by many airlines.
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JetBlue officials recently cut services to seven U.S. cities and eliminated 24 routes within the United States.
Just last week, Spirit Airlines said it was furloughing some 240 [pilots and downgrades 100 captains, as well as making other staff reductions. the low-cost carrier also dropped some two dozen routes in May and June.
"As we execute on our strategy to return to profitability, we remain focused on our near-term financial goals," JetBlue President Marty St. George said in the airline's second-quarter report for 2024.
He said JetBlue's near-term goals include "continuing normalization of competitive capacity in our core geographies."
"We are actively reinvesting in our core geographies in New York, New England, Florida and Puerto Rico while exiting routes and 'BlueCities' that don't meet our financial hurdle rate," St. George said.
Frontier, headed by the former marketing director at Spirit, is cutting 43 routes, including those affecting Cleveland, Philadelphia and Orlando, this month.
The airline is cutting the routes to reduce "network capacity given the current supply-and-demand imbalance" in the nation's airline industry that has too many airlines competing for available passengers, Frontier officials said in a prepared statement.
The overcapacity on leisure-focused routes in particular caused airline fares to fall -- something the industry wants to reverse.
Record airline travel
U.S. airlines were projected to carry an estimated 271million passengers from June 1 through Aug. 31, which is up by 6.3% from a year ago, according to the American Journal of Transportation.
The world's airlines are projected to generate $30.5 billion in profits for 2024, according to the International Air Transport Association. That's up from the $25.7 billion projected in December.
While airline travel is projected to rise, many carriers won't realize profits because of tightener operating margins -- especially on domestic routes within the United States.
Spirit Airlines officials in July lowered the budget airline's expected revenues due to lower-priced airfares and an a U.S. market that's oversupplied with carriers.
"Just because ... there's a heck of a lot of people going through security, that doesn't mean that we've got an industry that's killing it," Bloomberg Intelligence analyst George Ferguson said.
"If I were an investor, I would want record profits, too," Ferguson said. "From a margin perspective, we don't have that."
The drive for better profit margins is driving the airlines to focus on proven winners, as demand for airline travel traditionally declines at the end of summer.
"U.S. airline capacity continues to be trimmed," Jamie Baker, a U.S. airline and aircraft leasing analyst at J.P.Morgan, said in the firm's July 1 airline industry report.
"Based on current schedules, domestic capacity growth in the back half of the year is estimated to be a measly 3.5%," Baker said
Airline fares also are down after peaking at $280.96 in May, according to the U.S. Bureau of Labor Statistics. The average airline fare in June was $265.06 after opening the year at $247.61.
All monthly airfare averages so far in 2024 are lower than the respective monthly averages in 2023, though.
Aircraft shortages affect revenues
Among problems that affect airlines' profit margins is a lack of new aircraft for lease or purchase.
During the first quarter of the year, Boeing produced 83 aircraft, which is 47 fewer than the 130 the world's largest producer of commercial aircraft made during the first quarter of 2023, according to J.P. Morgan.
Airbus delivered 142 new aircraft during the year's first quarter, which is fewer than Airbus officials had projected, the analysts said.
Boeing is the world's largest producer of commercial aircraft, but federal regulators limited production of Boeing's 737 MAX airliners after several in-flight mishaps with Boeing's best-selling 737 MAX aircraft.
The plane's pilots made an emergency landing in New Zealand, where a dozen passengers were hospitalized.
FAA limited production
The Federal Aviation Administration responded to the Boeing-made problems by temporarily grounding all 737-9 MAX aircraft and limiting the aircraft's production until quality control issues the FAA said exists are solved.
Airbus, meanwhile, continues to experience issues with parts availability, which is hampering production at the world's second-largest producer of commercial aircraft.
As a result of shortages of deliveries, United Airlines, Southwest and other domestic and international airlines say they are keeping older aircraft in service longer and adjusting new aircraft orders for those that are more readily available.
American Airlines officials are making do with the airline's current fleet and said its next batch of new aircraft, the Boeing 737-10 MAX, isn't expected for a couple of more years.
Boeing and Airbus will need to improve their output of new aircraft to meet anticipated future demand, analysts said.
Boeing expects a 4.7% annual growth rate for passenger air travel over the next two decades. Officials at the company predict a global demand for 44,000 new airliners over the next 20 years -- 33,380 narrow-body airliners and 8,065 wide-body aircraft the latter largely for the Middle East.
An additional 1,525 jets for regional travel and 1,005 freight-haulers also will be needed through 2043, according to Boeing.
