Airlines Did More Flying In June


May 18, 2003
Airlines Did more Flying in June, but Fares Remained Low

NEW YORK (Dow Jones) - Airlines continued to fly more people farther this year than last as the peak travel season heated up, according to June data from four airlines on Friday.

Still, experts said, fares remain depressed because airlines have beefed up capacity, which likely caused industry yields to drop last month.

"We experienced a slight year-over-year decrease in load factor as well as a decline in yields. This downward pressure on unit revenues is driven by a double-digit increase in industry domestic capacity versus last year, which is well in excess of growth in demand," said America West Holdings Corp. (AWA) Vice President of Sales Scott Kirby in a statement.

"We expect the industry revenue environment to remain depressed through at least the back half of 2004, unless industry capacity is reduced," Kirby said.

America West didn't say how much its unit revenue fell in June compared with a year ago. Continental Airlines Inc. (CAL), the only airline that consistently reports monthly unit revenue changes, said unit revenue was up by around 0.5 to 1.5 percentage points compared with last year.

That's stronger than the drop analysts had expected, but still translates into a fall in yields, said Credit Suisse analyst James Higgins in a research note. Yields reflect the average fares airlines charge. He doesn't own shares but CSFB seeks business with airlines.

Continental's revenue passenger miles, a measure of the number of passengers multiplied by the number of miles flown, rose 12.2% in June, due mainly to large jumps in international traffic. The airline's Pacific traffic rose 46.4% from last year's level.

The Houston airline filled more seats last month as well, with load factor for the main airline rising 1.4 points to 82.4%. That was also due largely to filling more planes on international routes, although Continental's Latin American routes saw load factors drop 1.2 points to 75.9%, the lowest load factor of any region Continental flies.

Continental boosted capacity at the main airline by 20.1%.

The airline said it grounded more MD-80 airplanes in June, resulting in $10 million in special charges, putting the total aircraft grounding charge for the quarter at $30 million.

American West was one of three low-cost airlines to report a rise in June traffic, although unlike America West, the other two airlines filled more seats last month.

America West revenue passenger miles rose 9.5% in June as load factor dropped 1.2 percentage points to 80.5% compared with last year. The airline boosted capacity 11.1%, although Vice President Kirby complained excess capacity in the industry is harming yields.

Southwest Airlines Co. (LUV) revenue passenger miles rose 11.9% in June from last year, as load factor increased 4.2 percentage points to 78.8%. The airline boosted capacity by 5.9% in June.

AirTran Holdings Inc. (AAI) revenue passenger miles rose a whopping 19% in June from last year as load factor increased 2.9 percentage points to 77.3%. The airline increased capacity by 17.9%. AirTran's executives have complained about excess capacity in the industry.