US Airline Industry
Report: US airline industry remains fragile
Travel on major U.S. airlines fell roughly 1 percent in July with one key measure of revenue growth slowing, according to an industry trade group that also said the sector's finances remain fragile.
The Air Transport Association (ATA) said on Thursday that roughly 1 percent fewer passengers traveled on the biggest domestic carriers last month although fares were higher, helping airlines improve their bottom line.
July is traditionally one of the busiest months for airlines due to summer holiday travel. The revenue picture normally grows tougher as carriers get into fall when travel usually drops off.
A closely watched revenue measurement -- the average price to fly one mile -- rose 17 percent last month compared with the year-ago period, lower than June's increase of 22 percent.
Analysts expected an average revenue decline although traffic is up and flights are running nearly full.
"Demand for air travel remains well above last year's depressed levels, but the industry is mindful of cautionary notes about the health of the overall economy," said James May, ATA president.
Airline shares were broadly weaker on Thursday with the ARCA Airline Index .XAL off 3.78 percent.
Separately on Thursday, the ATA released its 2010 economic report and said the sector remained fragile and its outlook for profits uncertain.
"Put simply, the U.S. airline industry continues to be confronted by a systematic inability to cover its cost of investor capital or ... to exceed break-even profitability on a sustainable basis," the report said.
Carriers posted much better results in the second quarter on higher revenue from premium paying business customers and cost reductions partly realized from capacity cuts imposed during the 2008/09 industry downturn.
The outlook overall is certainly brighter than last year, prompting United Airlines, a unit of UAL Corp, and Continental Airlines to propose a merger that is expected to close before the end of 2010.
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