U.S. Airline Growth Seen Slowing
Reuters | Dec. 05, 2006
The strong growth that U.S. airlines have enjoyed over the past couple of years may be coming to an end, industry analysts said on December 5.
With the U.S. economy hampered by the slowing housing sector and consumers smarting from rising ticket prices, growth in air travel is likely to suffer.
"We've seen two eye-popping years on the key revenue metrics for the industry ... and I don't think that's something we can count on going forward," Bill Warlick, airlines analyst at Fitch Ratings, said at the Reuters Aerospace and Defense Summit.
Resurgent demand helped fuel a turnaround at airlines such as AMR Corp.'s American Airlines and UAL Corp.'s United Airlines, following a prolonged downturn after the September 11, 2001 attacks.
But growth in per-seat revenue and load factor -- the percentage of seats filled by paying customers -- is beginning to "plateau out," Roger King, an analyst at research firm CreditSights, said at the Reuters Summit. "We're going to start seeing those growth rates ... narrow."
For example, the load factor for American Airlines, the No. 1 U.S. carrier, rose 2.1 points in November, half the 4.2-point improvement in the same month last year.
The slowdown in growth could mean that the industry is reaching a peak and will struggle to push through future price increases, which has been a key factor in the rebound in airlines' profits.
"I don't know where the limit (on fare increases) is, but it can't be too much further away," said CreditSights' King.