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.