Delta Air Lines Inc. (DAL) and US Airways
Group Inc. (LCC) are among carriers raising fares and reaping domestic
bookings for summer travel as a recovering economy spurs more
Americans to take vacations.
Tickets for use in June through August rose 4.3 percent
from a year earlier, while prices are up 3.1 percent, based on
data compiled for Bloomberg by Airlines Reporting Corp. ARC
settles transactions between airlines and travel-sellers, so it
has insight into flights before the trips are taken.
“It seems like there’s pent-up demand from people who had
austerity for a number of years and really want and need a
vacation now,” said Kevin Crissey, an analyst at UBS Securities
LLC in New York. “I’m optimistic about the near term.”
Airlines count on filling planes at the highest possible
fares between June and August, when leisure flying peaks. They
may get a tailwind this year, after the number of Americans who
reported taking a vacation climbed to 2.7 million in April, the
highest tally for that month since 2007, according to the U.S.
Bureau of Labor Statistics.
The prospect of “very strong” summertime travel demand
and falling jet-fuel prices spurred Helane Becker, a Dahlman
Rose Co. analyst in New York, to raise earnings estimates
industrywide. Jets probably will fly with record numbers of
seats filled, she said in a note today.
The Bloomberg U.S. Airlines Index (BUSAIRL) of 10 carriers rose 2.5
percent, the most in two weeks, at 1:55 p.m. in New York. US
Airways jumped 5.9 percent to $10.65 to lead the gains, and
Delta climbed 3.5 percent to $10.50.
‘Really Good Shape’
“As we look across summer, bookings appear to be in really
good shape,” Delta President Ed Bastian said at a May 17
transportation conference in Boston hosted by Bank of America
Travel demand is “robust” and there is an “awful lot of
room” for airlines to increase revenues, US Airways President
Scott Kirby said at the same conference.
“We’re being aggressive for the summer” on raising fares,
Kirby said. “We feel really good about the outlook for May and
the summer, as far out as the eye can see.”
Revenue for each seat flown a mile, an industry benchmark,
in May and June probably will rise by “mid- to high single
digits” for the U.S. carriers, Crissey estimates.
Delta and US Airways gave figures in that range last week,
with Atlanta-based Delta forecasting a 7 percent jump in so-
called unit revenue in May, and June “a couple points better”
than that, Bastian said. Tempe, Arizona-based US Airways said
May unit revenue would rise by “mid-single digits.”
United Continental Holdings Inc., (UAL) the world’s largest
carrier, hasn’t given a unit revenue forecast for May or June
and AMR Corp. (AAMRQ)’s American Airlines, the third-biggest carrier in
the U.S., hasn’t given such projections while under bankruptcy
U.S. travel is a bright spot for domestic carriers, with
Europe mired in a sovereign debt crisis and growth in China, the
world’s second-largest economy, probably touching a 13-year low
in 2012. First-quarter yield, or fare per mile, averaged 14.6
cents for the six biggest U.S. airlines, topping all other
regional totals except for Latin America’s 16.1 cents.
“North America domestic is one of the best regions in the
world right now,” said George Ferguson, senior aerospace
analyst for Bloomberg Industries in Skillman, New Jersey.
“These signs are absolutely encouraging. I do think the trends
will continue” all summer.
A drop in fuel prices also will help airline profits. Once
up as much as 10 percent in 2012, jet fuel for immediate
delivery in New York Harbor fell 1.7 percent this year through
May 18, to $2.93 a gallon.
Airlines have cut available seats over the past several
years to trim costs, enabling them to fill planes to near-record
levels and bolstering their ability to raise fares in busy
travel periods such as the summer vacation season.
Load factor, or the percentage of seats sold to paying
passengers, averaged 80.9 percent in the first quarter among 12
U.S. airlines, topping the figures for the same period in each
of the previous two years, based on data compiled by Bloomberg.
“Airlines are getting pricing, which means there’s
reasonable supply constraint and consistent demand,” UBS
Securities’ Crissey said.
Southwest Airlines Co. (LUV) curbed expansion plans last week by
deferring delivery for four years on 30 Boeing Co. (BA) 737-800 jets
scheduled for 2013 and 2014.
The moves will pare capital expenditures by $1 billion next
year and in 2014, Chief Executive Officer Gary Kelly said on May
16 at the Dallas-based carrier’s annual meeting.
“We have a very solid second quarter under way and a very
solid earnings outlook for the year,” if fuel prices don’t
jump, Kelly said in an interview after the meeting. “Our
business is really strong across the board.”
To contact the reporter on this story:
Mary Jane Credeur in Atlanta at
To contact the editor responsible for this story:
Ed Dufner at