Optimism is spreading among US major carriers that positive revenue trends will continue even if economic growth stagnates in 2010. Executives at US carriers say airlines are climbing out of a deep revenue trough that peaked in mid-20009. Delta's corporate ticketed revenues were down 40%-50% during the first half of 2009 while US Airways posted a slide of 30%-35%.
But executives at both believe those drastic falls have abated, and cite encouraging sequential monthly improvements in corporate revenue trends. US Airways president Scott Kirby during a recent investor presentation said the carrier "crossed into being positive", as corporate contracted revenue was up 5%. Similarly, Delta president Ed Bastian tells investors the carrier is seeing "forward traffic indications in positive territory for the first time in over a year, so this is an indicator of what we should be experiencing on a go forward basis".
Kirby forecasts even with no improvement in the underlying economy or the revenue environment for airlines, industry revenue per available seat mile should rise roughly 10% in 2010. But he adds it will still be far below industry performance in 2008, noting that as "2009 was so bad", even anaemic recovery delivers a large increase in revenue year-over-year at an industry level".
He adds by far the strongest improvements in unit revenue are in the US Airways' business markets. "Our markets that have the highest percentage of business traffic are recovering the quickest," Kirby states. However, he stresses that leisure traffic did not fall as dramatically as business traffic since "leisure really never dropped off as much and business traffic fell dramatically".
Overall Kirby sees 2010 as "shaping up to be quite encouraging from a revenue picture, and if the economy improves I think there's further upside".
Bastian says Delta is building a plan for 2010 assuming modest economic improvement, roughly 2% growth in GDP. "We continue to think it is going to be choppy. But we believe we will see some improved conditions."
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Source: Airline Business
