Is demand for premium and international travel here to stay? It depends on which airline you ask
After a summer of sky-high demand for international travel and premium cabins, the "Big Three" U.S. airlines — American Airlines, Delta Air Lines and United Airlines — all reported record profits.
Now, those airlines are hoping those trends are long-term.
"Overseas, we think there's just a lot more opportunity," Andrew Nocella, United's executive vice president and chief commercial officer, said at the Skift Aviation Forum in Fort Worth on Wednesday. "And, at the end of the day, it's not that it's just so amazing on average. It's amazing when you have the seven gateways that United Airlines has."
Nocella said he believed the U.S. market has matured due to having many different carriers operating in different markets. He added that he forecasted the industry's domestic growth would be tied to the gross domestic product by the end of the decade, making it difficult for airlines to achieve high growth rates domestically.
American Airlines CEO Robert Isom shared a similar sentiment, saying that the Fort Worth-based carrier isn't necessarily worried about an oversaturated transatlantic schedule next summer and pointing to its partnerships with Iberia and British Airways as part of the Oneworld alliance.
"A lot of our work is done in complement with those carriers, and we're very mindful of what our hubs can support," Isom said at the Skift Aviation Forum on Wednesday.
The Big Three airlines have doubled down on international demand and premium travel since the summer. United has added more routes to Asia and placed an order for 110 more long-haul jets.
Isom said American expects its premium-seating capacity to grow by approximately 45% by 2026 as it receives new deliveries of Boeing 787-9s and Airbus A321XLRs, starting in 2024. These deliveries are also a part of American's plans to expand its presence in Europe for the summer 2024 travel season.
"I think customers view that as something that benefits them; they wanna have access to [it]," Isom said. "So we're gonna be there with them."
However, Robert Jordan, CEO at Southwest — the nation's fourth big carrier — sang a slightly different tune.
Jordan offered a more cautious outlook on the high demand for international and premium travel, expressing skepticism on how long the travel trends will stick.
"We've seen patterns before. I'm not arguing that this won't stick. But I am telling you, if you go back over the long history of the airline industry, there's been a move to premium, there are seats in, seats out, seats in, seats out, as an example," Jordan said at the Skift Aviation Forum, referring to what he believed was cyclical demand for premium seating.
Southwest reported strong profits during its second and third quarters but didn't see the same soaring profits as the Big Three carriers. The Dallas-based carrier, which operates a low-cost business model, flew only domestic routes until 2014. In the decade since then, the airline has added routes to Mexico, Central America and the Caribbean, but it lacks premium seating and the sprawling international route networks that have buoyed American, Delta and United.
"There is no doubt that premium and, again, long-haul international are seeing outsized benefits today, just like domestic leisure was seeing an outsized benefit, 18 months, 12 months ago," Jordan said. "We have continued to diversify our revenue significantly at Southwest Airlines."
Jordan added that ancillary products, Southwest's Rapid Rewards frequent flyer program and its cobranded credit cards have allowed the carrier to generate revenue at a faster pace than traditional seat growth. Southwest doesn't have any business- or first-class cabins in its fleet — instead, the carrier structures fares around other perks like priority boarding and free inflight internet.
While it's unclear how long passengers will want to shell out for first-class cabins or long-haul international flights, each airline executive believed their respective business models would work successfully in the long term.
The answer to what passengers really want likely will come soon enough. For now, though, look for the U.S. carriers to stick with what they believe is working.
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- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
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- Annual Fee is $325.
- Terms Apply.
Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.