DALLAS — Airlines stocks fell again Tuesday after disappointing monthly reports from American and Southwest suggested that airlines are losing the ability to raise prices.
American, the world’s biggest airline company, lowered its second-quarter forecast for a key revenue figure and pretax profit margin. Southwest reported that its key revenue figure tumbled 6 percent in May.
Southwest CEO Gary Kelly said his airline was on track for a record profit in the second quarter. But he added that Southwest is beginning to scale back its planned flying in the second half of the year because the economy is weaker than expected. Southwest plans to expand flying again in 2016, though not as aggressively as in 2015.
Basics of DiversificationStart Now »View all Courses
Both reports added to investors’ concern that the airlines may be adding flights faster than the pace of travel demand.
In midday trading, shares of American Airlines Group (AAL) were down 22 cents to $39.64 after slipping as low as $38.45; and Southwest Airlines (LUV) was down $1.58, or 4.4 percent, to $34.53. Shares of United Continental Holdings (UAL), Delta Air Lines (DAL), JetBlue Airways (JBLU), Alaska Air Group (ALK) and Spirit Airlines (SAVE) were also down.
American said that it expects revenue for every seat flown one mile in the second quarter will be 6 percent to 8 percent lower than a year ago. That’s worse than the previous forecast of a decline between 4 percent and 6 percent.
The company, which also operates US Airways and the American Eagle regional airline, said passenger traffic in May rose 0.7 percent while it increased passenger-carrying capacity by 2.1 percent, leading to more empty seats than a year earlier.
Southwest Airlines said the revenue-per-seat figure dropped 6 percent in May, and it expects a decline of 4 percent to 5 percent for the April-through-June quarter. The decline indicates that Southwest likely is getting lower average prices as it aggressively adds flights, especially in Dallas.
Overall, Southwest’s traffic grew 8.5 percent, which was enough to offset a 7.6 percent increase in capacity. The average flight was 84.4 percent full, which Southwest said was a record.