AIRLINES

Record Flying Demand Could Be On The Rocks Amid A “Fare War” Between Global Airlines

Revenge is a dish best served cold — just like revenge travel, which seems to be cooling off. After a years-long recovery for the airline industry, which saw sky-high airfare prices and record travel demand, the post-pandemic travel boom is starting to wane. Airlines are now warning shareholders about the challenges they face.

Ground hold: Despite American airports being busier than ever, the surge in travelers hasn’t been all good for airlines. In recent weeks, carriers like United ($UAL), Alaska ($ALK), and Delta ($DAL) have narrowed their earnings outlook and cautioned that “overcapacity” on domestic routes is costing airlines during the peak travel season.

• Airlines have reported that a “fare war” is driving ticket prices down and hurting profits — stemming from an influx of new seats on the market.

• United’s CEO Scott Kirby mentioned that airlines are “trimming their schedules” to reduce flights, which United hopes will help stabilize fare cuts.

When the Grass Isn’t Greener

In the US, airfares have dipped 5% compared to last year — a development that might thrill travelers but unsettle investors. And the situation across the Atlantic isn’t any brighter. Oddo BHF analysts, in a note downgrading Europe’s largest airlines, observed that “the vigorous post-COVID recovery in global demand is now running out of steam.”

• Yesterday, Europe’s largest airline, Ryanair ($RYAAY), reported a 46% decline in profits and warned that it expects “materially lower” airfares during peak summer travel.

• Even major events like the Paris Olympics and a record €800B in projected spending from international tourists in Europe this year have done little to help airlines like Air France-KLM ($AFLYY) and Lufthansa ($DLAKY), down 41% and 25% year-to-date.

Technical turbulence: Making matters worse, the fare war and shifting consumer behaviors aren’t the only hurdles they have to face. Last week’s CrowdStrike ($CRWD) outage left airlines with hours-long delays and technical headaches. Although most airlines have recovered, Delta’s troubles extended into Monday, with nearly one-third of its Friday and Saturday flights canceled and over 5.5K flights canceled since the outage began. Delta now faces the added burden of reimbursing customers for accommodations and alternative travel, which could further impact its already wavering profits.

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LARGECAP RECAP

📈 Prediction Markets Saw Biden’s Exit Coming Long Before Eventual Departure from 2024 Race

It starts with a whisper and grows into a roar. In prediction markets like PredictIt and Polymarket, those who whispered about Biden’s exit from the presidential race first have reaped the rewards. For months, bettors placed long-shot bets on Biden stepping down — a move that proved accurate and underscored the impact of these betting platforms.

• Bettors were more confident about Biden’s departure than many Washington insiders — with the odds of his exit exceeding 20% on PredictIt and Polymarket in the weeks leading up to the first presidential debate.

• After his poor debate performance, these unlikely wagers began paying off — with record betting activity on these platforms focused on Biden’s exit and Kamala Harris becoming the Democratic nominee.

They knew something: In May, regulators raised concerns about political betting platforms, suggesting they might undermine election integrity. Despite this, Polymarket has seen impressive growth, with daily volume hitting over $28M on Sunday — nearly six times the $4M to $5M daily volume from the previous month. These markets, driven by highly engaged “degens,” remain a valuable tool for gauging political perceptions (and profiting from their outcomes). Journalists and analysts increasingly refer to them as a leading indicator, and recent events have further confirmed their usefulness.

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Markets & Economy

US workers flex labor power: Bethesda Game Studios employees have formed a union amid rising labor movements in gaming. Disneyland ($DIS) workers authorized a strike after stalled contract negotiations, highlighting ongoing labor challenges in the entertainment industry. [Read]

Guaranteed income program shows positive results: Research backed by OpenAI’s Sam Altman found that a basic income positively impacted mental health, financial stability, and employment. The three-year study provided $1K monthly payments to low-income participants in Stockton, California. [Read]

Buffett shaves Bank of America stake: Berkshire Hathaway ($BRK.A) trimmed its Bank of America ($BAC) stake for the first time since 2019. The conglomerate sold almost $1.5B of shares after a 27% rally this year, sparking speculation about the financial sector’s outlook. [Read]

Business & Wealth

“Twisters” dominates box office: The sequel to 1996’s “Twister” opened to $80.5M domestically, exceeding expectations and becoming 2024’s third-biggest debut — ranking only behind sequels for “Dune” and “Inside Out 2.” Nostalgia and star power contributed to its success. [Read]

Parents can help children unlock 700+ credit scores: Parents are adding their children as authorized users on their credit cards, helping 18-year-olds start with credit scores over 700 — well above the 666 Gen Z average. However, easy access to debt can prove dangerous to young adults. [Read]

Drug shortages persist: Active drug shortages fell to 300 in Q2 2024, down from a record 323 — marking six straight quarters with over 300 drugs in shortage. Critical medications, including ADHD and cancer drugs, remain among the most affected. [Read]

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DIGIT OF THE DAY

Apple to Cut Back on Spending for Apple TV+ After $20B Investment in Original Content

Budgets have been so tight in America that even Apple ($AAPL) has decided to quit spending. Since the launch of Apple TV+, Apple has poured over $20B into original TV shows and movies. Yet, despite these hefty investments, the returns have been disappointing, with low viewership and poor box-office performance — prompting Apple to rethink its spending strategies.

• Apple TV+ captures just 0.2% of US TV viewing. Only four series have made it into Nielsen’s weekly top 10 in five years, and its monthly viewership lags far behind Netflix’s 9.9%.

• Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near believe Apple TV+ has struggled because its “original content [offers] a fraction of what rivals offer” (BBG).

Apple’s new plan: To turn things around, Apple plans to be more selective about its projects. The core strategy to stay in the steaming game involves controlling costs by peeling back upfront payments for shows, postponing some productions, and increasing content licensing from other sources.