Airline Passenger Traffic Continues To Climb, but Faces Stiff Headwinds

 - May 23, 2011, 11:30 AM
The Air Transport Association of America projects U.S. airlines will carry 206.2 million passengers this summer, 1.5 percent more than in 2010. High fuel prices could limit traffic growth, however.

Airline passenger traffic continues its climb out from recessionary lows, but faces headwinds caused by spiraling fuel prices.

The Air Transport Association of America (ATA) projects U.S. airlines will carry 206.2 million passengers from June through August–3 million (1.5 percent) more than during the same period in 2010. ATA forecasts a record 26.3 million passengers, about 13 percent of the total, will travel on international flights.

“In the next decade, the majority of travel growth will take place outside of our borders in developing economies,” said Nicholas E. Calio, ATA president and CEO. “To facilitate U.S. competitiveness and meet customer demand, airlines must be able to operate in an environment that is conducive to international expansion.”

An estimated 180 million U.S. domestic passengers would represent a 1.5 percent increase over the 177.3 million who flew last summer. The industry set the record in 2007, when 192.4 million passengers flew domestically during the summer.

Still, the ATA said projected passenger volumes have not recovered from pre-recession levels experienced during the summer of 2008 and remain well below the historical high of 217.6 million passengers in summer 2007.

Airlines, fighting sharply escalating fuel prices, generally have responded by raising air fares and containing capacity. The ATA said that U.S. airlines paid 11.4 billion for fuel in the first quarter, 30 percent more that during the same period last year. The price of jet fuel now stands at its highest level since the third quarter of 2008.

 “Fuel is the biggest challenge facing this industry and Delta is actively reducing capacity, implementing fare actions, hedging our fuel needs and attacking our cost structure in order to offset fuel’s impact on our earnings,” Delta CEO Richard Anderson said in a first-quarter earning announcement.

Among legacy carriers, Delta, United-Continental and American Airlines each reported first-quarter net losses. The three airlines also reported increased year-over-year traffic in April measured in revenue passenger miles, based on increased capacity from last year. Delta reported a 2.6-percent increase in system traffic; United-Continental, 1.1. percent; and American, 2.7 percent. Load declined in each case, however.

“It is encouraging that more people will be flying this summer, despite higher energy prices taxing the entire economy,” said Calio. “The trends are pointing in the right direction.”