Some Carriers Report Record Occupancy; Capacity Cuts Caused Some

After enduring recent turbulent times, US carriers have been given a bit of breathing room by summertime travel increases.

Profits for the period of April through June are expected to be higher than last year when second-quarter results start coming in this week, according to the Associated Press. Some carriers have already posted record occupancy loads on their flights.

"The good news is that it appears June came in pretty strong and the midsummer travel bulge is helping the industry, as it always does," said Bill Warlick, an analyst for Fitch Ratings. "Everybody is running at full loads."

In April, Southwest Airlines Chief Executive Gary Kelly said there were indications that travel demand was softening. April and May's traffic reports appear to agree.

United Airlines reportedly filled 89.1 percent of its seats, its highest level for June while Continental Airlines Inc. reported 87.7 percent occupancy, a record, and American saw 87.1 percent, according to the Associated Press.

Those numbers aren't quite as impressive as you might think, though. The only reason American and United could report fuller planes, is because the carriers had fewer of them in the air. American actually flew 3.5 percent fewer passengers, after it cut capacity by 5.4 percent.

Analysts have lowered their earnings forecasts for airlines -- in some cases by double-digits -- for reasons ranging from soaring fuel costs to weather... so the future is not completely rosy, even as the industry is beginning to recover from years of losses.

Airlines "will make more money than (the) same period last year though not as much as we originally thought because of higher fuel costs and the inability to get through across-the-board ticket price increases," said Calyon Securities analyst Ray Neidl.

Low-fare airlines such as Southwest resisted large fare price increases proposed by larger carriers because the larger carriers needed the hike because they've had a lot of new seats to fill because of new aircraft purchases, according to Neidl. Southwest did raise its own prices several times, he adds, just on a smaller scale.

Goldman Sachs analyst Robert Barry says a recent pullback in airline stock prices has made them a slightly better investment than before... but the fundamentals of the industry still produce big questions.

FMI: www.goldmansachs.com, www.calyonamericas.com, www.fitchratings.com