US Planes Full In December Despite Economic Woes

January 6, 2009

Downsizing at major US airlines kept planes full during the winter holidays despite weaker travel demand in a sagging economy, according to data released this week.

The capacity cuts bolstered an uptick in unit revenue at Continental Airlines and reflect rare stability for a business that a year ago was perceived to be in dire financial straits.

"I can't see any of the airlines filing for bankruptcy unless you see demand drop like 30 percent," said Morningstar analyst Basili Alukos.

"I think they're in a lot stronger shape," he said. "Prices have come up across the whole spectrum."

The airline industry, clawing its way out of a downturn resulting from high fuel prices in the first half of 2008, reduced the number of seats for sale in the second half to improve efficiency and support fares.

Plummeting oil prices since July further insulated carriers from the economic recession that hobbled other industries.

As the holidays approached, some experts wondered how much the recession and higher airfares would weaken travel demand.

Data from Continental showed a 6.7 percent year-over-year drop in December traffic on a capacity reduction of 8.1 percent.

The carrier estimated its December unit revenue rose between 4 percent and 5 percent for its mainline operations. Continental is the only major airline to issue monthly unit revenue figures.

JPMorgan airline analyst Jamie Baker said in a research note on Monday that Continental's unit revenue estimates were better than expected but that he still expects a quarterly loss.

United Airlines said its mainline traffic declined 11.5 percent in December, while capacity fell 12.7 percent. The airline said its planes were 81.6 percent full, compared with 77.7 percent in December 2007.

American Airlines said its traffic fell 8.2 percent in December on an 8.6 percent decline in capacity. The carrier said its planes were 79.2 percent full, compared with 78.8 percent a year ago.