U.S. airlines report solid financial earnings and show optimism about the demand for travel. Despite warnings from economists.

Despite warnings from experts and economists that there is a greater possibility of an economic recession, U.S. airlines report solid financial earnings and show optimism about the demand for travel.

Because of the reopening of restricted borders, a strong dollar, and an increase in business travel, carriers are experiencing the highest levels of demand for travel since the COVID-19 epidemic began.

On Tuesday, United Airlines Holdings predicted that this year's full-year profit will increase by at least four times as it anticipated that flight demand would increase.

Similar to this, Delta Air Lines forecasts a roughly doubled full-year profit this year.

On Wednesday, shares of United Airlines rose 3.3% in premarket trading, helping rivals American and Delta gain around 2% each.

The positive news coincides with over half of the 50 U.S. states showing symptoms of slowing economic activity, crossing a critical barrier that frequently indicates the beginning of a recession, according to research released last month by the St. Louis Federal Reserve Bank.

Concerns regarding consumer spending have been raised by a weakening economic outlook and a rise in the financial vulnerability of American consumers.

With increased ticket prices, carriers have been able to offset rising fuel and labour expenses, but any downturn in consumer spending is projected to erode their ability to set prices.

According to United, the domestic passenger industry used to contribute roughly 0.5% of the nation's GDP. It anticipates that the trend will return this year, leading to an increase in industry revenue of 15%.

In 2023, customers will spend $30 billion on travel, according to Delta's estimates.

The risk is being underestimated by airline executives, who claim that there is still a significant desire to travel. The link between passenger revenue and the overall economy, according to them, is really returning to its pre-pandemic trajectory.

Last month, United Chief Executive Scott Kirby claimed that if he hadn't been reading or watching the news, he would not have heard the term "recession," as the airline had not noticed any evidence of it in booking statistics.

After the busy holiday travel period, the first quarter is often the industry's least profitable period.

However, Delta claimed last week that each month of the current quarter's advanced bookings was "substantially" ahead of 2019 in terms of passenger revenue and volume.

Based on the report, there is a strong demand for flights to Europe, which is anticipated to lead to record spring and summer earnings.

United thinks that total revenue per available seat mile, a measure of pricing power, will increase by 25% from the previous quarter.

(investing.com, reuters.com)