The major US carriers turned in another healthy set of profits for the second quarter, but as the mid-year results rolled in, Wall Street was already getting jittery over the likely timing of a downturn.
The headline results were again based on the strength of the domestic economy, where a combination of capacity restraint and healthy traffic growth has helped push load factors up to new heights and keep yields moving in the right direction. Costs have continued to benefit from fuel prices which remain at an historic low.
The domestic boom even helped Trans World Airlines to turn around its losses in the quarter. The results of its fleet rationalisation and attempts to sharpen up its operating performance, helped the airline towards its highest load factors for two decades. Its next target is to increase prices, says chairman Gerald Gitner.
The strength of the US passenger market is underlined by a new series of statistics launched by the Air Transport Association, which tracks ticket prices among the network carriers. That shows an average fares rise of 1.7% over the first half of the year.
Even as the results rolled in, however, financial analysts had begun to mark down airline stocks from their recent highs, citing fears over the scale of new aircraft capacity due to come on to the market over the next year and concerns over how much longer the domestic boom will last. Downturn in Asia, increasing international competition and recent union settlements are also raising concerns.
The worries were underlined by a sharp drop in profits at Northwest Airlines, which was hit by weakness in key Asian markets as well as union disruptions as the carrier continues its heated negotiations with pilots and machinists. United Airlines has also suffered in Asia, but says it has compensated with prompt action on costs.
Source: Flight International
