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Business Travel

US carriers see dramatic recovery in business travel

Mary Schlangenstein  Jun 15, 2010

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 2.8 percent at 10:45 a.m. in New York, pushing it toward a sixth straight gain. That would be 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 at 10:35 a.m. in New York Stock Exchange composite trading, while Fort Worth, Texas-based AMR added 21 cents, or 2.5 percent, to $8.66. US Airways jumped 68 cents, or 7 percent, to $10.34. The shares reached the highest intraday price since Nov. 4, 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.

Business travel “clearly is returning,” Continental Airlines Inc. Chief Executive Officer Jeff Smisek told investors.

Those passengers are prized in the industry because they often fly at the last moment and tend to pay the highest fares. Corporate-travel revenue jumped 50 percent in May from a year earlier at Tempe, Arizona-based US Airways, Kirby said.

“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.”

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.

US carriers see dramatic recovery in business travel
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Source: Bloomberg

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