BofA Says More Airline Capacity Cuts Ahead

As fall approaches, travel patterns are set to turn to lean more toward corporate and less toward leisure demand, which foreshadows more capacity cuts at airlines in September and beyond, according to BofA Securities.

The Airline Analyst: Andrew Didora said that while domestic leisure bookings have continued to improve, domestic corporate bookings have shown no improvement since mid-June.

The Airline Thesis: Leisure bookings volumes improved to down 51.2% in the latest data, from the previous week’s negative 52.3%, while corporate bookings volumes are still down by around 88%, Didora said in a Monday note.

As the peak leisure summer period ends and the business-heavy fall season begins in the next few weeks, there could be meaningful capacity cuts by airlines, the analyst said. 

Domestic capacity could decline from down 46.4% in August to down 50% in September, with greater capacity cuts coming in October, he said.

American Airlines Group Inc AAL, JetBlue Airways Corporation JBLU and Allegiant Travel Company ALGT have already reduced capacity, Didora said. 

Although United Airlines Holdings Inc UAL, Spirit Airlines Incorporated SAVE and Hawaiian Holdings, Inc. HA have not yet made meaningful cuts to October schedules, additional capacity reductions can be expected in the coming weeks, the analyst said. 

The schedules of Southwest Airlines Co LUV, which is the only carrier so far to update October capacity, reflect greater capacity declines in October versus September, according to BofA. 

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