Carole Shifrin/WASHINGTON DC
Major US airlines expect this year's exceptionally strong summer traffic to be reflected in their operating profits, despite continuing high fuel prices.
"It is booming," says an official of United Airlines, which saw traffic up during June in all its operating regions-domestic, Atlantic, Pacific and Latin America - and expects the surge to continue until the Labour Day holiday on 4 September.
"Since traffic is so strong," he adds, "there was no incentive to discount prices, so yields should be reasonably robust."
The overall traffic gains, accompanied by relatively modest increases - and in some cases decreases - in capacity, have been pushing load factors to levels unheard of a decade ago. American Airlines, which has been reducing the number of seats per aircraft to give passengers more legroom, had a 2.1% decrease in system capacity in June while passenger traffic rose 5.6%, pushing its overall load factor to 79.6%. Its European traffic was up even more smartly, growing by 10% in June on a 3.2% capacity gain, which pushed its load factor to 91%.
Delta Air Lines, the largest US carrier to Europe, had a transatlantic load factor of 90.3% in June. Aided by its expanding partnership with Air France, traffic jumped 14.2% for the month while capacity was up 5.7%.
American and other carriers' officials credit the strong US economy for the summer boom. "There is a lot of confidence in the economy and people want to travel," American says. "They've become used to travelling the last decade." While there are some predictions of a downturn in the economy, "they still want to take a trip before the economy slows down," the airline adds. The strength of the US dollar against the Euro, boosting Americans' buying power, also may have played a role in boosting traffic, United says.
Passengers have thronged to flights despite the absence of heavy discounting, airlines say, so higher yields are expected. Carriers also are becoming more creative in the way they sell seats, such as with Internet specials, American says. "A decade ago, we were looking at a third of seats being empty, but now we have 80-85% load factors," it says. "Airlines have found ways to sell their last-minute inventory without diluting the revenue from their primary source - the business traveller. The overall amount of excess inventory is also smaller."
A beneficiary of this year's higher demand are consolidators. Last summer, the airlines had so much excess capacity that they offered hugely discounted tickets directly to customers. John Deacon, president of New York-based Travac, says the absence of fare sales this year has helped boost his business substantially "because my fares are competitive". Primarily a wholesaler, Travac gets contracts from the airline and markets available seats primarily to travel agents.
Source: Airline Business
