Airlines see 'dramatic' business travel recovery
Delta Air Lines Inc. and American Airlines, the largest U.S. carriers, forecast second-quarter gains of at least 17 percent on a benchmark for industry revenue as rising demand buoys fares.
Passenger revenue for each seat flown a mile will climb about 20 percent, Atlanta-based Delta said today at a Bank of America-Merrill Lynch conference in New York. American parent AMR Corp. said revenue on the same basis from its main jet operations would increase at least 17 percent.
Analysts watch so-called unit revenue because it measures what airlines earn on each available seat. After cutting fares and capacity when business fliers dwindled in the recession, Delta, American and other big carriers are flying fuller planes and charging more for tickets.
"The industry appears to be turning a corner," US Airways Group Inc. President Scott Kirby told investors at the conference. "We've seen a dramatic recovery in business travel."
The Bloomberg U.S. Airlines Index of 12 carriers rose 2.6 percent at 4 p.m. in New York for a sixth straight gain, the longest advance since March 29, based on data compiled by Bloomberg.
Airlines Rise
Delta climbed 30 cents, or 2.2 percent, to $13.99 in New York Stock Exchange composite trading, while Fort Worth, Texas- based AMR added 34 cents, or 4 percent, to $8.79. US Airways jumped 80 cents, or 8.3 percent, to $10.46, the highest since Nov. 3, 2008.
International flights are leading the boost for Delta, with unit revenue up 50 percent on Asian markets in June and 30 percent on routes across the Atlantic, President Ed Bastian said in New York. American and Continental Airlines Inc. also said business travel was especially strong in Asia.
"The recovery is on," Continental Chief Executive Officer Jeff Smisek told investors. The airline is benefiting from more corporate fliers and a higher average fare per mile, he said.
Business passengers are prized in the industry because they often fly at the last moment and tend to pay the highest prices. Corporate-travel revenue jumped 50 percent in May from a year earlier at Tempe, Arizona-based US Airways, Kirby said.
'Traction on Pricing'
"There haven't yet been big increases across the industry," Kirby said of airlines' recent ticket-price moves. "There have been some tactical fare increases in recent weeks. I'm optimistic that, given the strong revenue environment we and others are seeing, that we'll start getting some traction on pricing."
Companies also are rescinding requirements from the past two years that employees travel on cheaper coach tickets, American CEO Gerard Arpey said.
The comments by Delta, American, Continental and US Airways built on yesterday's forecast by United Airlines parent UAL Corp. that unit revenue on its main jets would rise as much as 29 percent this quarter.
United and Continental agreed last month to a merger that would create the world's biggest airline, vaulting past Delta. Chicago-based United and Houston-based Continental are now the third- and fourth-largest carriers in the U.S.