Soaring Fuel Costs
ARLINGTON (theHub.com) - The New York Times reported today that last month, among the top 14 United States carriers, the number of planes taking off and the number of passengers flying were up 4.1 percent and 6.3 percent, respectively, over February 2003 for domestic and international trips, according to the Air Transport Association. But an important measure of airline finances, revenue per available seat mile, grew only 0.7 percent last month for domestic trips. That was less than stock market analysts had expected, and partly reflected a 9.4 percent growth in domestic seat capacity. Growth in capacity is likely to add extra downward pressure on domestic airfares.
After averaging $20 a barrel from 1992 to 2001, crude oil rose to $26 a barrel in 2002, $31 a barrel in 2003 and prices for the first quarter of this year are projected to average $35 a barrel, according to John Heimlich, the chief economist of the Air Transport Association. Airlines are now paying "double what the industry was paying in 1998 and 1999" for fuel, he said.
In an analysis released on Friday, Kevin Mitchell, the chairman of the Business Travel Coalition, said that the major network airlines were most hamstrung by these forces because their high operating costs made them unable to generate enough profit in competition against the expanding lower-cost, low-fare carriers, which now account for about 27 percent of domestic traffic. The Business Travel Coalition has forecast a 4 percent increase in business travel this year. But much of that will be attributable to demand stimulation by low-cost carriers as they enter new markets and "discipline major airlines' pricing," Mitchell said.
Regards,
USA320Pilot
ARLINGTON (theHub.com) - The New York Times reported today that last month, among the top 14 United States carriers, the number of planes taking off and the number of passengers flying were up 4.1 percent and 6.3 percent, respectively, over February 2003 for domestic and international trips, according to the Air Transport Association. But an important measure of airline finances, revenue per available seat mile, grew only 0.7 percent last month for domestic trips. That was less than stock market analysts had expected, and partly reflected a 9.4 percent growth in domestic seat capacity. Growth in capacity is likely to add extra downward pressure on domestic airfares.
After averaging $20 a barrel from 1992 to 2001, crude oil rose to $26 a barrel in 2002, $31 a barrel in 2003 and prices for the first quarter of this year are projected to average $35 a barrel, according to John Heimlich, the chief economist of the Air Transport Association. Airlines are now paying "double what the industry was paying in 1998 and 1999" for fuel, he said.
In an analysis released on Friday, Kevin Mitchell, the chairman of the Business Travel Coalition, said that the major network airlines were most hamstrung by these forces because their high operating costs made them unable to generate enough profit in competition against the expanding lower-cost, low-fare carriers, which now account for about 27 percent of domestic traffic. The Business Travel Coalition has forecast a 4 percent increase in business travel this year. But much of that will be attributable to demand stimulation by low-cost carriers as they enter new markets and "discipline major airlines' pricing," Mitchell said.
Regards,
USA320Pilot
