Air traffic shows signs of recovery; posts smallest drop in 18 months

Southwest Airlines Co. and Continental Airlines Inc. led the six biggest U.S. carriers to their best traffic results in 18 months in a sign that the air-travel slump is ending.

Traffic, measured in miles flown by paying passengers, slid 1 percent in November, the smallest decline since June 2008. Southwest today posted a 12 percent increase, while Continental's traffic climbed 2.8 percent.

"It is encouraging," said Robert Mann of R.W. Mann & Co., a Port Washington, New York-based aviation consultant. "What we need is people back working and able to spend on air travel, and businesses profitable and willing to invest not only in jobs but in travel. All those things are generally positive."

The results indicate that the worst of the travel decline is over. The Bloomberg U.S. Airlines Index has risen 17 percent since Nov. 27, heading toward the best weekly advance since May. Morgan Stanley analyst William Greene recommended airline stocks on Dec. 2, saying investors would be "hard-pressed to identify a better entry point" for potential gains.

U.S. carriers benefited from the timing of the peak travel days after the Thanksgiving holiday falling entirely in November this year, a period that spilled into December in 2008. An improving labor market last month also indicates the recession may have ended, said Robert Hall, who heads the National Bureau of Economic Research panel charged with making the call.

Southwest, which is promoting its lack of fees to check the first two bags, filled 76.5 percent of available seats last month, a November record, said Beth Harbin, a spokeswoman for the Dallas-based airline.

'Significant Demand'

"We continue to experience significant demand for our promotional fares and positive customer response to our 'Bags Fly Free' campaign," Harbin said in an e-mail. Southwest is alone among the top six airlines in not charging for luggage.

Signs of improving industry sentiment include plans by United Airlines parent UAL Corp. to place an order for a "significant" number of new wide-body jets in the coming weeks to refresh its fleet.

Morgan Stanley's Greene, who is based in New York, raised his ratings on American Airlines parent AMR Corp. and Chicago- based UAL this week to "overweight" from "equal weight," saying profits will improve as the economy recovers.

Delta Air Lines Inc. Chief Financial Officer Hank Halter said on Dec. 2 that demand is slowly returning and unit revenue may start rising by mid-2010. The world's largest carrier had the worst traffic results of the group for November, posting an 8.3 percent decline for its main jet operations because of a drop in trans-Atlantic and domestic travel.

The following table shows the largest U.S. airlines, ranked by traffic, and their November gain or decline in miles flown by paying passengers on their main jet operations compared with a year earlier. The figures are from the carriers' reports.