12/13/2007
U.S. airlines expect essentially flat passenger traffic during the holidays, a rather meek forecast for an industry nearing the end of a year marred by record delays and rising fuel costs.
Domestic airlines are expected carry 47.2 million passengers globally during the three weeks that started Thursday and end Jan. 2, compared with 47 million last year and 46.8 million in 2005, according to the Air Transport Association of America.
Analysts said the flat forecast shows demand has eased a bit prompting airlines to cut the number of flights offered.
The ATA, in releasing the forecast, didn’t echo that sentiment.
“Despite signs of slowing in the economy and sky-high energy prices, we expect to see another strong season of holiday air travel,” ATA President and Chief Executive James May said in a release.
The four busiest days during the winter travel period are expected to be Jan. 2, Dec. 21, Dec. 27, and Dec. 26, with each averaging more than 2.5 million passengers. The ATA expects Christmas and Christmas Eve, each with an average of 1.9 million passengers, will the least busy.
Robert Mann, an airline consultant in Port Washington, N.Y., said the forecast shows demand on the days farthest away from the actual holidays has declined and that airlines have scaled back their capacity to match that.
Like they did for the busy Thanksgiving travel period — when ATA forecast a 4 percent traffic increase — airlines have added staff, extra self-service kiosks and other enhancements to terminal and gate areas. And when delays do happen, carriers will let customers know via wireless devices up to 24 hours in advance.
The trade group advised passengers to plan for longer-than-usual security lines, especially on the busiest travel days, and to pack any gifts unwrapped to ease inspections.
The passenger forecast comes as a large winter storm settled in across the Northeast, and airlines urged travelers to expect delays and reschedule trips involving the high-traffic region. Delta Air Lines Inc. and Continental Airlines Inc. were permitting customers to change affected flights without penalty.
Federal aviation regulators in October held a two-day summit focused on John F. Kennedy International Airport’s “epidemic” delays, which can ripple throughout the county. New York’s JFK had the third-worst on-time arrival record of any major U.S. airport through October, behind LaGuardia and Newark.
The government has proposed alleviating delays by reducing JFK’s hourly flight limit by 20 percent. But the ATA and the Port Authority of New York and New Jersey, which runs JFK, both prefer flight-path changes and improvements aimed at increasing the airport’s capacity.
Transportation Secretary Mary Peters is scheduled to deliver a delay-reduction plan to the president next week, and the airlines expect her to recommend that Newark and JFK add hourly flight limits. Auctioning slots also is a possibility.
Department of Transportation spokesman Brian Turmail on Thursday said no decisions had been made.
The airline industry’s on-time performance through October was the second worst on record since comparable data began being collected in 1995, the department said earlier this month. About 24 percent of flights arrived late in the first 10 months of the year.
The Bush administration and the Federal Aviation Administration last month announced a number of initiatives, including temporary use of military airspace off the Atlantic coast, to help with the Thanksgiving rush. But delays were up during the holiday week compared with last year due mainly to bad weather, and the government last week had to defend itself on a different front: runway safety.
A Government Accountability Office report found the number of runway incursions spiked in fiscal 2007 due to poor FAA leadership, malfunctioning technology and overworked controllers.
Back on the business side, the ATA’s flat holiday forecast comes one day after the International Air Transport Association cut its 2008 global industry profit forecast to $5 billion from $7.8 billion, due partly to rising oil prices and the credit crunch. North American carriers will see the largest fall in profitability to $2 billion in 2008 from $2.7 billion this year, the international trade group said.
But ATA Chief Economist John Heimlich on Wednesday said its members will post their third-straight profitable year in 2008. While concerned about rising fuel prices, Heimlich said the industry has taken cost-cutting steps and is better positioned to weather an economic downturn than in the past.
A barrel of light sweet crude for January delivery fell $2.14 to settle at $92.25 on the New York Mercantile Exchange Thursday. Fuel costs, at 25.4 percent, accounted for the largest chunk of U.S. airlines’ operating expenses in the second quarter of 2007, and are expected to represent about 28 percent of global expenses in 2007, according to aviation trade groups.
On Wall Street, the Amex Airline Index added 44 cents to 37.31 in afternoon trading after earlier sinking as far as 35.89, its lowest point since April 2003.
http://www.businessweek.com/ap/financialnews/D8TGPUDO0.htm
Source: BUSINESS WEEK
Date: 2007-12-13