US airlines face sharp drop in international demand


NEW YORK – Domestic carriers face a significant slump in international travel, driven by less consumer spending and reduced U.S. import and export growth, Morgan Stanley analyst William Greene warned Wednesday.

In a note to investors, Greene said he now expects U.S. airline revenue to fall 11% for the year, compared to his prior outlook of an 8% decline. Hardest hit would be the lucrative international routes, particularly those of American parent AMR Corp. and Continental. Mainline international revenue could fall 12% for 2009, versus a prior forecast of a 6% decline, Greene said.

“We now expect international revenue to decline more than domestic revenue in 2009, a particularly alarming trend considering that we forecast international capacity to fall only 3.5% vs. 7.4% capacity cuts domestically,” he said.