Wed, May 23, 2012
High Travel Demand And Falling Fuel Prices Cited
Airline stocks have been rebounding as investors expect that a combination of high travel demand will combine with softening fuel prices to boost industry profits. Airlines have been limiting the supply of seats and boosting prices for some time. Collectively, they imposed about a dozen broad fare increases last year and two so far in 2012 which has led to higher revenue per mile. For Delta and American the increase was 11 percent higher in April while US Airways increased 9 percent compared with a year earlier.
Reportedly, the higher prices aren't scaring away passengers, and flights remain more than 80 percent full. Ed Bastian, President of Delta Air Lines Inc. said last week that demand for summer travel was strong and "bookings appear to be in really good shape."
NJ.com reports that in addition to high load factors, airlines are benefiting from falling crude oil prices leading to cheaper jet fuel. The spot price for jet fuel fell 8 percent in the first half of May, according to government figures. Fuel is the airlines' biggest expense, eclipsing labor, so any pullback is a big help.
Airlines are continuing to keep a lid on passenger-carrying capacity. Last week, Southwest Airlines Co. announced that it would delay delivery of 30 Boeing jets by four years rather than expand its fleet.
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