Airlines in the U.S. scale back expansion plans in an effort to halt discount-driven losses.

• Airlines in the U.S. are scaling back their expansion strategies for the latter half of the year.
• Low-cost airlines that are losing money are facing growing pressure to reduce their expansion plans and eliminate unprofitable routes.

Passengers may face higher fares as U.S. airlines reduce their capacity to address an oversupplied domestic market.

Airlines in the US experienced a significant reduction in capacity for the fourth quarter, with a decrease of almost 1% compared to the previous week, according to Deutsche Bank. Despite this, airlines anticipate a growth of approximately 4% in flying during the last three months of the year.

Although there has been a significant overall decrease, we anticipate additional reductions in the near future as airlines adjust their schedules, according to Deutsche Bank airline analyst Michael Linenberg in his note.

U.S. airline executives have observed high demand but a saturated U.S. domestic market, prompting them to curb growth plans, potentially leading to higher fares. According to the most recent U.S. inflation report released earlier this month, airfare in June decreased by 5.1% compared to the same month last year and 5.7% from May.

If travel demand remains constant, airlines could increase fares to increase their profits, but this could lead to dissatisfaction among consumers.

On Thursday, the company reported a 46% decline in its second-quarter profit and announced plans to reduce its capacity growth in the coming months, expanding by less than 1% in September compared to the previous year.

American plans to grow 3.5% in the second half of the year after expanding about 8% in the first six months of the year, according to CEO Robert Isom. This growth led to a higher level of discounting activity in the quarter than anticipated due to excess capacity.

Deutsche Bank reported that low-cost and discount airlines are cutting unprofitable routes and scaling back capacity, with plans to contract 2.2% in the fourth quarter from the same period of 2023.

The airline has cut unprofitable routes and increased flights to popular city pairs. The company will release its financial results before the market opens on Tuesday.

Meanwhile, warned of a wider-than-expected loss for the second quarter due to lighter-than-expected non-ticket revenue, which includes fees such as checked bags and seating assignments.