Airlines start to see better times ahead
U.S. airlines report steady signs of recovery that point to an improved outlook for 2010. Speaking at an analyst conference in New York yesterday, airline executives noted improved passenger demand in recent months and positive revenue trends looking forward.
U.S. airlines report steady signs of recovery that point to an improved outlook for 2010.
Speaking at an analyst conference in New York yesterday, airline executives noted improved passenger demand in recent months and positive revenue trends looking forward.
US Airways Group Inc. said corporate travel was up 5 percent in November from a year ago, the first month for positive business-revenue growth this year, president Scott Kirby said. Corporate travel was down 30 percent to 35 percent in January, and it has improved a little each month since May.
"This is very indicative of a business-demand recovery," Kirby said at the Next Generation Equity Research Airline Conference.
Philadelphia's largest airline, which transports two-thirds of passengers here, is fairly bullish about the revenue outlook, Kirby said.
The largest year-over-year improvements are in business-oriented markets, such as the Boston-Washington Shuttle, he said. "Our markets that have the highest percentage of business traffic are recovering the quickest."
Kirby said airlines had been helped by a gradual increase in peak-travel day fares since September.
"We are going to bounce back pretty significantly in 2010. This is not bouncing back to normal levels, but 2009 was so bad that just an anemic recovery means we have a large year-over-year increase in revenue."
Delta Air Lines Inc., the world's largest carrier, has "seen revenue strength above our expectations," chief financial officer Hank Halter said.
"I anticipate demand to remain strong. The big question is: When is the unit revenue going to go positive?" he said. Unit revenue is revenue per paying passenger. "Clearly, it's going to be in 2010 and likely the front half of 2010."
Analysts are watching airlines' revenue projections as an indicator that the turnaround may be gaining traction. Airlines were hit last year with volatile fuel prices and a sharp drop in lucrative business travel as companies slashed budgets.
"We are seeing improvement in both leisure and premium traffic," said Beverly Goulet, vice president at American Airlines. "While the domestic markets have appeared to recover at a slightly faster pace, we're starting to see some improvement in the international markets as well," she said. "We continue to see strength in close-in bookings."
Southwest Airlines Co., Philadelphia's second-busiest carrier, however, does not expect a rebound in business and premium-paying customers in 2010.
Chief executive officer Gary Kelly said, "Business travel still lags. I don't know that we've seen any improvement. I don't think it's gotten worse, but I'm also not prepared to give any bold predictions about where it's headed."
Kelly said Southwest did not expect strong economic growth in 2010, would keep seat capacity flat, and would continue to trim unprofitable flights.
"In the current recessionary environment, we've had disproportionate pressure on business and premium traffic," said UAL Corp. chief financial officer Kathryn Mikells. "The good news is there are signs of recovery on the horizon."
"Since May, we have started to see a steady improvement both in corporate revenue and premium-cabin bookings. While the numbers clearly are still not where we would desire them to be, it is a very encouraging time line."
Mikells said talks were under way among United, Continental Airlines Inc., and Japan's All Nippon Airways Co. Ltd. for a joint venture. The carriers already sell seats on one another's planes. A joint venture would allow closer coordination and more revenue sharing on flights across the Pacific.
Discount-fare carrier AirTran Holdings Inc. told analysts it expected to post a record profit this year, helped by its low-cost structure and growth in ancillary revenue - fees for things such as checked bags.
"I think everyone can agree the worst is behind us and things are improving," AirTran chief financial officer Arne Haak said.