U.S. and European airlines have embarked on a record-breaking summer of transatlantic flights as a test of travel demand on some of the world’s most profitable routes.
Nearly 418,000 flights are scheduled between the U.S. and Europe between April and October, 7 percent more than last year’s record, according to aviation data consultancy OAG.
Airline executives have reported particularly strong demand from American travelers to Europe, buoyed by a strong dollar.
“Like many of Europe’s great tourist destinations, there are lots of Americans walking the streets of London,” said Ed Bastian, chief executive of US airline Delta.
There are also significant numbers of European tourists travelling in the other direction, causing a surge in capacity on transatlantic routes.
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Transatlantic capacity remains above July 2019 levels, but capacity is shrinking on routes from the U.S. and Europe to Asia. United Airlines has the most capacity planned for July, with more than 722,000 seats, up 3% from July 2023, while British Airways is planning more than 419,000 seats, up from just over a year ago.
Meanwhile, Air France increased its capacity by more than 15% to 279,000, the biggest increase among transatlantic airlines, according to aviation data provider Cirium.
Virgin Atlantic recorded its highest ever revenue from passengers flying from the US to the UK last month, while in the other direction it is seeing particular interest from British travellers to Los Angeles, San Francisco and Florida.
The surge in demand for transatlantic travel comes amid signs of unrest in the U.S. domestic market, leading some investors to question whether a supply glut could spill over to routes between the U.S. and Europe.
Airlines executives say there are few signs of cracks in transatlantic travel demand, as a strong currency and continued demand for international travel in the wake of the coronavirus pandemic have encouraged Americans to fly to European destinations including Italy, Spain and France.
“I, [to travel] “I felt like I was trapped for years and now I’m here again,” Bastian said.
He pointed to an additional factor: Taylor Swift fans are seeking concert tickets, which are generally cheaper than in the United States, boosting demand for flights to Europe.
A surge in demand for leisure travel, particularly business and first class, is helping to offset the continued decline in corporate travel, which has yet to return to 2019 levels.
“The transatlantic market is one of the most attractive for airlines and, for many airlines, it is no doubt the most profitable part of their network,” said John Grant, principal analyst at OAG.
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U.S. airlines are also keen to fly across the Atlantic as seat supply exceeds demand in the domestic market, driving down fares.
Rob Morris, an analyst at Cirium, said transatlantic revenues remain strong, providing airlines with “pricing opportunities.” “More and more airlines are looking to make money on these routes,” he added.
The summer is also set to see more low-cost transatlantic flights than usual, as more airlines seek to enter a market traditionally dominated by a handful of established carriers such as BA, United and Delta.
Just over 7,300 flights are scheduled between North America and Europe, operated by low-cost carriers such as Air Nordic and Canada’s Air Transat, but that still only accounts for about 5% 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 airlines compete for more market share.
This is evident in domestic U.S. travel, where abundant seat supply has led to discounted fares at a time when fuel and labor costs are rising.
U.S. airline shares fell after Delta Air Lines forecast third-quarter profit below Wall Street expectations despite strong second-quarter revenue, as did United Airlines.
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United Airlines CEO Scott Kirby predicted a “tipping point” would come by mid-August, causing domestic capacity to fall by three percentage points.
“The industry can’t afford overcapacity,” said Raymond James analyst Savanti Sis. “Something has to change.”
For now, demand for travel to Europe looks stronger, but Air France-KLM warned this month that it would take a financial hit after a “significant number” of tourists avoided traveling to Paris during the Summer Olympics.
Lufthansa also warned that it was “increasingly difficult” to break even this year, due in part to pressures on airfares.
Morris said airlines continue to have pricing power on transatlantic routes despite some investor concerns, especially amid an industry-wide shortage of new planes, but fares could fall if Boeing and Airbus take delivery of more planes.
United Airlines Chief Commercial Officer Andrew Nocera this week played down concerns that a glut of transatlantic flights would hurt profit margins later this year, even as capacity to southern Europe has grown 31% this year.
Compared to last summer, the industry is
United has been “carefully” managing “regional demand”
The schedule for the rest of the year is set, he said.
“We remain confident that conditions in the Atlantic will remain favorable going forward.”
