ANALYSIS: Demand slips at North American carriers in April

Washington DC
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Major North American carriers saw demand fall in April, as US government budget cuts hit some of the region's largest airlines especially hard.

A basket of the region's eight largest carriers, including Air Canada, Alaska Airlines, American Airlines, Delta Air Lines, JetBlue Airways, Southwest Airlines, United Airlines and US Airways, saw passenger revenue per available seat miles (PRASM) - a widely accepted measure of demand - fall by about 3.9% during the month compared to a year earlier. Air Canada and Alaska do not report the metric.

Flightglobal Research

The decline was largely attributed to the impact of the US federal government's budget cuts, which are known as the sequester. Other factors include the devaluation of the Japanese yen.

The about $85 billion across-the-board budget cuts have reduced government travel and resulted in the temporary furlough of many federal employees since they were implemented on 1 March. The US Federal Aviation Administration (FAA) has been forced to cut $637 million from its budget, which resulted in the short-lived furlough of air traffic controllers around the country in April.

US Airways has said that government-related travel was down 37% in March, and warned of a weak April. The Tempe, Arizona-based carrier operates a large focus city at Ronald Reagan Washington National airport.

Delta Air Lines said in April that bookings from defence industry corporate clients, which often work on federal government contracts, fell by 15% to 20% in March.

The load factor fell 1.1 percentage points to 81.6% across the carriers as traffic growth failed to keep pace with capacity increases in April. Revenue passenger miles rose 0.2% year-on-year while available seat miles grew by 0.6%.

The carriers, excluding Air Canada, carried 55 million passengers during the month, which was down 0.8% compared to April 2012.

The weak results may not continue. Ed Bastian, president of Atlanta-based Delta, said that the carrier's outlook for the peak summer months - June, July and August - remains "strong" and that advance bookings were "solid", at the Bank of America Merrill Lynch 2013 Global Transportation Conference on 15 May.