ChrisJasper/LONDON
The USA's major carriers are suddenly more bullish about their financial prospects for the rest of the year following a modest improvement in overall market conditions and better than expected performance in the first quarter.
Most of the country's big airlines expressed serious concerns about their likely fortunes for 1999 after a downturn in the latter third of 1998 which took the gloss off strong overall figures for the year.
But with the increasingly strong US economy heightening domestic demand for air travel and even the Asia-Pacific market showing signs of recovery, that downturn seems to have been a hiccup rather than the start of a major slump.
While US carriers are feeling the pinch on transatlantic routes, where new capacity has flooded the market, they have not suffered the severe drop in yields that has afflicted European airlines.
United Airlines appears particularly optimistic, indicating that it expects earnings per fully distributed share to be around $1.35 for the quarter to 31 March and between $10 and $12 for the full year. The projections are well in excess of the First Call consensus of $1.12 and $9.12 respectively.
Predicting "strong domestic performance" from the quarter, United says: "This assumption is based on a continuation of trends which indicate a reversal in the decline in domestic revenue strength that began in the fourth quarter of 1998 and continued into early 1999."
It adds that it "believes these trends could in part result from the dissipation of general economic uncertainty and improvements in the industry pricing environment". That environment has allowed most majors to introduce two fare hikes in the year so far, and though influenced by fuel price variations, United says the rises stem from "strong market conditions", with demand exceeding supply.
The airline adds that it sees "early indications of modest improvements in Asia-Pacific revenues and profits", outweighing a decline in the Atlantic market, although it does not plan to redeploy capacity yet.
American Airlines has not shared in the upturn, with an industrial dispute expected to reduce pre-tax earnings by $200-225 million for the first quarter.
Source: Flight International
