U.S. air traffic stronger in March

AMR Corp.'s American Airlines and UAL Corp.'s United Airlines pared declines in traffic in March, suggesting that the industry's slump in travel may be easing.

Passenger traffic on the six biggest U.S. carriers fell 11 percent from a year earlier, less than February's 11.4 percent, according to data compiled by Bloomberg. American, United and Continental Airlines Inc. had smaller declines than in the previous month, while Delta Air Lines Inc. had a larger drop.

The results hint at stabilization in demand after the recession crimped business and leisure trips. As more people resume flying, carriers would regain the ability to raise fares after slashing prices to help fill seats. Traffic is measured in miles flown by paying passengers.

"There might be some early signs that things are improving," said Matthew Jacob, an analyst at Majestic Research LLC in New York.

Investors also are signaling optimism about the industry, sending the Bloomberg U.S. Airlines Index of 13 carriers up 50 percent from a low on March 5. That's more than twice the gain in the Standard & Poor's 500 Index.

"A sentiment rebound is likely to drive shares higher in the near term," William Greene, a Morgan Stanley analyst in New York, wrote in a note to investors today before the index tumbled 4.7 percent along with broader market gauges.

Delta, Southwest

Delta, the world's largest carrier, said March traffic fell 13.8 percent on a plunge in overseas travel, its worst result in more than a year and deeper than February's 8.8 percent drop. Southwest Airlines Co., the biggest discounter, had the best results, with a decline of less than 1 percent. It flies only in domestic markets.

American is the second-largest U.S. carrier, followed by United, Continental, Southwest and US Airways Group Inc. Their March results marked the eighth straight month of lower traffic compared with a year earlier.

The prospect of a bottom in the slump isn't showing up yet in revenue for each seat flown a mile, an industry benchmark for fares and travel. Continental and US Airways each posted declines in so-called unit revenue of more than 17 percent.

"The traffic numbers do show there is a willingness to travel but, unfortunately for the airlines, they have to really push prices down to get tickets sold," Jacob said.

Easter Effect

Airlines' traffic results might have looked better in comparison with 2008 if not for the early timing of Easter, which boosted travel in March last year rather than April, when the holiday usually occurs.

Adjusting for Easter, March traffic dropped about 8 percent, suggesting that demand "may have stabilized," Michael Derchin, an analyst at FTN Midwest Research Securities in New York, said today in a note.

"March was a tough month but likely to mark the trough in this cycle," Derchin wrote.

To respond to plunging travel demand, the biggest U.S. airlines have chopped seating capacity by more than 10 percent since the start of 2008 by parking more than 500 jets. They also have eliminated 29,000 jobs.

Delta has said it will reduce international flying by an additional 10 percent starting in September. Continental needs to cut capacity by 5 percent more, according to Derchin.

The following table shows the largest U.S. airlines, ranked by traffic, and their March decline in miles flown by paying passengers compared with a year earlier. The figures are from the carriers' reports and exclude flights by regional partners. Delta acquired Northwest Airlines in October and now reports combined results.