US and European airlines have embarked on a record-breaking summer of transatlantic flying, in a test of demand for travel on some of the world’s most lucrative routes.
There are nearly 418,000 flights scheduled between the US and Europe from April to October, 7 per cent higher than the record set last year, according to aviation data consultancy OAG.
Airlines bosses have reported particularly strong demand from US travellers visiting Europe, buoyed by the strong dollar.
“A lot of Americans are walking the streets of London, as they are in many other great destinations across Europe,” said Ed Bastian, chief executive of US carrier Delta.
European tourists are also travelling the other way in significant numbers, and capacity along transatlantic routes has boomed.
Capacity along transatlantic routes exceeds where it was in July 2019, while it has shrunk on routes to Asia, from either the US or Europe. United Airlines scheduled the most seats in July — more than 722,000, up 3 per cent from July 2023 — while British Airways has planned more than 419,000 seats, slightly more than one year earlier.
Meanwhile, Air France boosted its seating capacity by more than 15 per cent to 279,000 seats, the largest increase among transatlantic carriers, according to aviation data provider Cirium.
Virgin Atlantic recorded its highest ever revenue for passengers travelling from the US to the UK last month, while in the other direction, flagged particular interest from UK travellers flying to Los Angeles, San Francisco and Florida.
The booming demand for travel across the Atlantic comes amid signs of a wobble in the US domestic market, with some investors asking if capacity oversupply could bleed into the US-Europe routes.
There are few signs of cracks in demand across the Atlantic, according to airline bosses. Along with the strong currency, continued demand for international travel following the coronavirus pandemic has encouraged Americans to fly to Europe, including Italy, Spain and France.
“I think there is a desire [to travel] after years of feeling cooped up,” Bastian said.
He pointed to an added factor of Taylor Swift fans driving up demand for European flights, as they sought concert tickets that were generally cheaper than in the US.
This jump in demand for leisure travel — particularly in business and first class — has helped compensate for the continued decline in corporate travel, which is yet to return to 2019 levels.
“There is no doubt that the transatlantic market remains one of the most attractive markets for airlines and for many carriers is the most profitable part of their networks,” said John Grant, chief analyst at OAG.
US airlines, too, are motivated to cross the Atlantic as the supply of seats in the domestic market outstrips demand, sending fares lower.
Yields remained strong on transatlantic flights, offering carriers a “pricing opportunity”, said Cirium analyst Rob Morris. “People are going out to make money on these routes,” he added.
This summer will also see more low-cost airlines fly across the Atlantic than in previous years, as a growing number of carriers look to break into a market traditionally dominated by a handful of legacy airlines including BA, United and Delta.
Just over 7,300 flights by low-cost carriers including Norse Atlantic and Canada’s Air Transat are scheduled between North America and Europe, although this will still only account for about 5 per cent of the market, according to OAG.
The airline industry has a history of adding more flights and seats to the market than consumers want, as carriers compete for a greater share of the market.
This has been evident in US domestic travel, where the plentiful supply of seats has led to discounted fares, at a time when fuel and labour costs have increased.
Shares in US airlines declined after Delta forecast lower third-quarter profit than Wall Street expected, as did United, despite strong second-quarter revenue figures.
United chief Scott Kirby predicted “an inflection point” by mid-August, with industry domestic capacity falling 3 percentage points.
“This is an industry that can ill-afford overcapacity,” said Raymond James analyst Savanthi Syth. “Something has to give.”
For now, demand for travel in Europe appears more solid. But Air France-KLM this month warned it would take a financial hit after a “significant” number of tourists have avoided trips to Paris over the summer Olympics.
Lufthansa has also warned it was becoming “increasingly challenging” to break even this year, citing reasons including pressure on air fares.
Despite worries among some investors, airlines are continuing to maintain pricing power on transatlantic routes, particularly amid an industry-wide shortage of new aircraft, Morris said. But as Boeing and Airbus deliver more planes, fares could decrease.
United chief commercial officer Andrew Nocella this week shrugged off concerns about a transatlantic supply glut hitting margins later this year. Capacity for flights to southern Europe has risen 31 per cent this
summer compared with last year, with the industry pushing “the limits of
demand” to the region, but United has been “careful” in managing
scheduling for the rest of the year, he said.
“We feel good about the set-up that the Atlantic will continue to look pretty good going forward.”
