Wed, Aug 17, 2011
Carriers And Analysts Expect Slow Comeback For Business
Travel
With the end of the peak summer travel season just three weeks
away, US airlines are staring at volatile fuel costs and declining
consumer confidence, and are likely to make the decision to reduce
their capacity, or at least hold off on expansion of available
seats. Delta and Southwest have already announced plans to do so,
and Hunter Keay, an analyst at New York-based Wolfe Trahan &
Co., tells Bloomberg others will follow the trend toward
contraction.
The recent roller coaster of the downgrade by Standard &
Poor of the quality rating of federal debt, followed by wild swings
in stock prices, have contributed to consumer confidence in the US
reaching its lowest level since 1980. Keay predicts, "I don’t
think airlines should view that nervousness as short term. If
executives are going to go out and assume high fuel prices are here
to stay, then they should assume that fear and destruction of
consumer wealth are here indefinitely as well."
Despite gasoline prices for motorists which declined ten cents
per gallon last week, and predictions the fall could continue,
refining costs for jet fuel are predicted to rise. Bloomberg
reports airlines have tried to recoup those costs by raising fares
at least eight times this calendar year so far, but in three of the
last four attempts, they've had to roll them back again.
The industry's bread and butter are business travelers, who
often have no choice but to pay high, last-minute fares. Southwest
Airlines CEO Gary Kelly (pictured) sees slow growth ahead in that
segment, telling Bloomberg, "It’s very clear the economy is
not recovering. Business travel...won’t grow until the
economy really does grow at a healthy rate."
Among other airlines, United Continental says it will not cut
capacity in 2011. At the other extreme, American Airlines has made
three progressive cuts totaling 1.9 percent of capacity, and says
it expects to cut more seats in 2012.
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