Posted on: Wednesday, August 6, 2003

Fuller flights lift hopes of recovery

By Dan Reed
USA Today

This summer, the nation's fleet of commercial jets is flying closer to full than ever before, and that's much better than during the war a few months ago.

But industry executives, while optimistic, aren't crowing about a recovery just yet, partly because flight cutbacks have left fewer seats to fill.

Demand has grown in each of the past three months, since the war ended, and especially since the middle of June. That's giving a starving industry reason for hope and, at most carriers, modest summer profits for the first time in three years.

The seven major airlines that have reported their July traffic results so far all had record or near-record load factors, largely because of fewer flights.

Planes at American, Delta, Continental and US Airways and Northwest departed last month, on average, with more than 80 percent of their seats filled.

Continental, the only carrier that each month provides guidance as to what its passengers paid, said its revenue per passenger mile rose 4 percent to 6 percent in July from July 2002. If its monthly revenue performance accurately reflects what's happening across the industry — and for the past two years it has — then most of the major carriers were profitable in July and should be so again this month.

That increase in revenue per seat-mile is being driven not only by rising demand but also by big reduction in flights at many airlines.

At Continental, where domestic demand was up 9.3 percent in July, domestic capacity was up only 1 percent in July. At Delta, domestic demand actually fell 3.6 percent from July 2002. But domestic capacity was down 10.5 percent.

The relationship between demand, capacity and revenue per seat-mile is even more telling at American. Demand in July was down 0.4 percent. But capacity was down 6.9 percent.

The summer's boomlet in demand still is well below what it was in 2000.

Scott Kirby, executive vice president at America West, said his airline has converted to a low-fare airline because management believes demand for high fares will never return to what it was in the late 1990s.

"Even if the economy comes all the way back, business travelers who have been paying $600 coast-to-coast aren't going to say, 'Boy, I'm glad I can pay $2,300 again,' " he said.