August 17, 2011 in Business

Airlines planning cautiously

Mcclatchy
 

PHILADELPHIA – After last week’s volatile stock market, more U.S. airlines may trim flying this fall because of cautious consumers in an uncertain economy.

Although fuel costs are lower, which is good for airlines, some industry observers predict fewer people will take to the skies after the traditionally busy summer travel season.

Analyst Hunter Keay, with Wolfe Trahan & Co., wrote in a client note that United Continental Holdings Inc. and Delta Air Lines will likely announce in coming weeks that they won’t grow and might cut back service in 2012.

Southwest Airlines Co. said recently that passenger demand was slowing – particularly business travel.

Southwest announced that growth next year would be flat to down slightly.

With continuing volatility of fuel prices, destruction of consumer 401(k) wealth and a growing possibility of recession, Keay said airlines “have little leeway” but to trim unproductive routes.

Others are more upbeat.

Analyst Bob McAdoo with Avondale Partners LLC said he thinks lower fuel prices for airlines and lower gasoline prices at the pump will blunt the need for airlines to further cut flying – beyond what’s been announced – in the fall.

“The stock market is halfway back to where it was through all this volatility,” McAdoo said. “Fuel is clearly down, at $85 versus $105 (per barrel on oil). Gasoline prices are down probably 50 cents a gallon versus where they were in April.”

Passenger travel in July was “in line with our forecast,” while ticket pricing was “better than our estimates,” Dahlman Rose & Co. analyst Helane Becker said in a note.

“August and September continue to book ahead of last year,” and together with lower jet fuel costs, the third-quarter “is trending above initial expectations,” Becker wrote.


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