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The Honolulu Advertiser
Posted on: Sunday, April 26, 2009

Airlines hoping worst is at an end

By David Koenig
Associated Press

Hawaii news photo - The Honolulu Advertiser
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In the past few weeks, the largest U.S. airlines have reported staggering losses and a sharp downturn in traffic during the first quarter. But some airline executives think the worst might be over.

No airline chieftain was bold enough to say a recovery in travel has started.

But executives at Delta, American and Continental all suggested — with an unmistakable air of hope — that at least traffic levels aren't collapsing the way they did earlier this year.

Here are some questions and answers about the state of airline travel amid a slumping economy.

Q: How badly did traffic fall in the first quarter, and where's it going?

A: It went from bad in January to ugly by March.

Take Continental, for example. There's a key measurement in the airline business called RASM, revenue per available seat mile — the amount of revenue an airline generates, relative to its capacity.

Continental's RASM slid 4.8 percent in January, 11.5 percent in February and about 20 percent in March. The April numbers won't be good, either — down 13 to 15 percent, the company said Wednesday.

Continental executives were optimistic, to a point.

"Things seem to feel better today than they did 45 days ago," said Chairman and CEO Lawrence Kellner, "but I'm not sure if that's simply because the pace of the decline is slowing or because things are actually stabilizing."

Q: If traffic is down, which travelers are staying home?

A: Mostly business travelers, and that's bad for airlines. Business travelers fly a lot, and they tend to buy their tickets closer to the day they'll fly.

Q: When will business travel return to its old levels?

A: When there are signs that the recession is lifting.

"Corporate travel is down pretty significantly, and that's discouraging," said Gerard Arpey, chairman and CEO of AMR.

But, Arpey said, companies "need to go to conventions. They need to go out and drum up business. "

Q: Will airlines cut more flights?

A: Stay tuned. Even though airlines have cut capacity this year — some by double-digit percentages — traffic has fallen even more sharply.

Continental executives said either traffic will have to grow or airlines must further reduce supply to meet the new and lower demand.