Airlines Report No Signs Yet Of Downturn

When it comes to monitoring for signs -- any signs -- of a US economic recession, one could argue no one remains more vigilant than the nation's airlines... but try as they might to see signs of a looming slowdown, most say they just haven't seen it... yet.

Though most airlines reported losses for the fourth quarter of 2007 when they announced earnings last week, executives attributed that drop mostly to higher fuel prices, rather than a snowballing economic crisis, reports The Dallas Morning News.

Continental, for one, has heard "numerous reports that the US is on the cusp of an economic recession," said CEO Larry Kellner on January 17. Despite the reports, however, he added  "[w]e're watching our future bookings closely and do not see a slowdown based on our current booking levels."

That sentiment was mirrored by US Airways Group president Scott Kirby last week, who said his airline is "concerned about the economy," but that "it's hard to find any concrete evidence of a booking slowdown... and fundamental trends for US Airways and the industry at large remain robust."

Tom Horton, chief financial officer for American Airlines parent AMR Corp., bluntly addressed analysts' pleas for capacity cutbacks two weeks ago. American "can respond if we think it's appropriate, and it may well become appropriate," he said. "I am not suggesting we've ruled that out by any means. But we do try not to kind of manage our capacity based on headlines day-to-day."

Horton added American has seen its booked load factors for the first part of 2008 increase by 0.8 percent.

"We do try to be very thoughtful about this and watch our advance booking, watch the pricing environment," he told analysts. "We look at all the sort of corporate-demand survey data, and we talk to our corporate customers. So, at this point, we think we've got a fairly conservative capacity outlook. But we're going to keep watching. I think that's really all I can say."

That level of foresight should help the airlines weather a short-term downturn, said Southwest Airlines CEO Gary Kelly. In the past, airlines have taken a reactionary approach to downturns.

"The airline industry has anticipated this economic environment better this time than ever before, because you've already seen airlines shrink and cut their capacity," Kelly said. "The airline demand is not in recession, but the growth has been anemic."

Kelly also notes, however, airline performance is often a problematic sign of a recession.

"Historically, air travel demand is a lagging indicator," he said. "The recession starts, traffic is still strong, and then later companies begin adjusting their travel budgets after they realize they're in a recessionary environment."

FMI: www.usairways.com, www.aa.com, www.southwest.com