Source: Bloomberg News Author: Mary Jane Credeur 05/22/2009
Subject Concerned: Opinion Airlines
Air travel during the U.S. Memorial Day holiday may decline about 1 percent, setting up the industry's worst summer since 2002 as consumers forgo trips in the recession.
About 2.1 million people in the U.S. plan to fly for the May 25 holiday commemorating the nation's war dead, while about 27 million will venture by vehicle, according to AAA, the country's biggest motoring and leisure travel organization.
Fewer plane trips for Memorial Day, the traditional start of the U.S. summer travel season, may herald a 7 percent drop in summer flying as the recession saps demand, the Air Transport Association trade group estimates. Jets still may be crowded after Delta Air Lines Inc., American Airlines and other carriers reduced flying by more than 10 percent to slash costs.
"At a peak period such as Memorial Day, planes are likely to be more full even if the overall passenger numbers are down," said Douglas Runte, an analyst at Piper Jaffray & Co. in New York who follows airlines and Boeing Co.
Traffic, or miles flown by paying passengers, has declined for 11 straight months as the industry heads into its busiest season. The six biggest U.S. carriers posted a combined 5.1 percent decrease in April traffic, smaller than the 11 percent losses in both March and February.
Investor concern that the recession will damp demand drove the Bloomberg U.S. Airlines Index of 13 carriers to a 43 percent decline this year. Carriers' shares fell again on May 22, dragging the gauge to its fourth drop in a row.
Carriers including Southwest Airlines Co. are offering tickets for as little as US$49 one-way to entice consumers to travel. Southwest said on May 20 that it will trim capacity by 6 percent this year, more than its previous target for a 5 percent cut, to cope with what Chief Executive Officer Gary Kelly called a "very tough demand environment".
Fares Down
Fares over Memorial Day are down about 12 percent from a year ago, said Tracey Weber, North American president for Travelocity.com Inc., which gets about three-fourths of its bookings from vacationers. Leisure prices for the summer have declined about 17 percent, luring bargain hunters, she said.
"That is stimulating some consumers to book when maybe they previously wouldn't have," Weber said in an interview. Travelocity's bookings are up year over year, she said, declining to give specific figures.
AMR Corp. Chief Executive Officer Gerard Arpey said on May 20 that he will use "every lever" necessary to keep American's planes full and that he's prepared to remove more capacity.
Job losses and the recession are keeping more people at home, according to the Air Transport Association, the lobbying group for the biggest U.S. carriers, which issued its summer-travel forecast on May 15. The projected 7 percent decline would be the biggest drop in the peak summer travel season in seven years, the Washington-based group said.
Swine Flu
More Americans may go on road trips this Memorial Day than last year to take advantage of a 39 percent decline in gas prices. The average price of a gallon of unleaded gas fell to US$2.33 on May 19 from US$3.80 a year earlier, according to AAA.
The swine flu outbreak isn't damping vacation plans. Of U.S. residents who intend to travel from May through August, 95 percent kept their plans, according to a survey of 1,149 adults conducted during the first week of May by Paris-based Ipsos Travel & Tourism Research.
A worsening of the flu formally known as H1N1 would prompt 13 percent of respondents to cancel travel plans, Ipsos said. Continental Airlines Inc. and UAL Corp.'s United Airlines temporarily cut Mexico flying by half in response to dropping demand for travel to the country hardest hit by the flu.
AMR's Arpey said the flu has had a "devastating impact" on travel to Mexico, and that he is "hopeful that the worst is behind us". The Fort Worth, Texas-based carrier temporarily reduced a third of its flying to Mexico.
All Travel Climbs
Southwest's Kelly said the company could "definitely see the impact on bookings and revenue" when news of the flu spread and travelers became nervous about flying. He said he's not sure there's been a "bounce back" yet for Southwest, which doesn't fly to Mexico.
Total U.S. travel for the Memorial Day holiday will rise about 1.5 percent from last year as lower gasoline prices spur more vacationers to take road trips, AAA said.
About 32.4 million people will venture at least 50 miles (80 kilometers) from home, AAA said. Eighty-three percent of those will go by automobile.