For an airline industry used to struggling with terror attacks and surging oil prices, a surfeit of available seats seems like a tame problem.
Yet concerns about overcapacity -- which undermines pricing power -- have roiled the sector in recent days, helping trigger the industry's biggest stock sell-off in over four months on Tuesday and dominated analysts' questions to airline executives in quarterly conference calls.
Bankruptcy filings by Delta Air Lines Inc. (DALRQ.PK: Quote, Profile, Research) and Northwest Airlines Corp. (NWACQ.PK: Quote, Profile, Research), along with the grounding early this year of smaller low-cost airline Independence Air, have taken over a hundred aircraft out of service, boosting demand for the remaining seats.
Average U.S. air fares edged up 1.3 percent in 2005 through November compared with the year ago period, although the average fare in 2005 was still about 18 percent below the fare in 2000, according to a preliminary analysis by the Air Transport Association.
Available seat miles on the U.S. market are poised to shrink 3.9 percent this year. That compares with a 1.1 percent rise last year and a 7 percent increase the year before.
"It's an improved situation," said Ray Neidl, an analyst at Calyon Securities. "The question is, are some people getting over-excited about it?."
Reuters
Yet concerns about overcapacity -- which undermines pricing power -- have roiled the sector in recent days, helping trigger the industry's biggest stock sell-off in over four months on Tuesday and dominated analysts' questions to airline executives in quarterly conference calls.
Bankruptcy filings by Delta Air Lines Inc. (DALRQ.PK: Quote, Profile, Research) and Northwest Airlines Corp. (NWACQ.PK: Quote, Profile, Research), along with the grounding early this year of smaller low-cost airline Independence Air, have taken over a hundred aircraft out of service, boosting demand for the remaining seats.
Average U.S. air fares edged up 1.3 percent in 2005 through November compared with the year ago period, although the average fare in 2005 was still about 18 percent below the fare in 2000, according to a preliminary analysis by the Air Transport Association.
Available seat miles on the U.S. market are poised to shrink 3.9 percent this year. That compares with a 1.1 percent rise last year and a 7 percent increase the year before.
"It's an improved situation," said Ray Neidl, an analyst at Calyon Securities. "The question is, are some people getting over-excited about it?."
Reuters
