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(An article from Yahoo! Finance by AP.)
Airlines Reporting Near-Record Occupancy
Wednesday May 3
By Stan Choe, AP Business Writer
More Passengers, Shrinking Capacity Mean Fuller Planes
Airlines across the industry are reporting higher traffic numbers for April, as planes are flying at their fullest levels since the 1940's.
From low-cost carrier Southwest Airlines to legacy carrier Continental Airlines, companies are reporting occupancy rates in the mid 70s to mid 80s. The numbers are among the highest in the industry's history, said Mike Boyd, an airline industry consultant based in Evergreen, Colo.
"Everything's full," he said.
That's what happens when demand is up -- more passengers are flying -- and supply is down -- airlines continue to reduce some domestic capacity because of high jet fuel prices, said David Castelveter, spokesman for the Air Transport Association, a Washington-based industry group.
The higher occupancy rates mean the industry is reporting some of its strongest results in years. Michael Linenberg, a Merrill Lynch analyst, said in a research note that when all the carriers report their April traffic numbers, he's expecting "superb" gains in domestic revenue per available seat mile, which equals one paying passenger flown one mile and is the airline industry's measure of traffic.
Some analysts believe the improvement is likely to continue.
JP Morgan analyst Jamie Baker, who counts himself among the more optimistic of industry watchers, said he sees the airline industry's recovery lasting through next year. Baker wrote in a research note that for next year, he's projecting higher industry revenue, slightly higher capacity and continued high occupancy rates of 80 percent.
"Anyone who has flown recently won't debate this," he wrote.
The high price of oil, however, continues to be the thorn in the industry's side for profitability: each increase in jet fuel of 1 cent means $199 million in annual operating costs for the industry, according to John Heimlich, chief economist for the Air Transport Association.
Last year, U.S. airlines reported a domestic occupancy rate of 77 percent, which was their highest rate since 1946, according to data compiled by the Air Transport Association.
Of the airlines who have already reported their April traffic numbers, both low-cost and legacy carriers are reporting even higher occupancy rates than last year.
Year-to-date, Delta Air Lines Inc., Southwest Airlines Co. and American Airlines parent AMR Corp. all reported fewer empty seats on their flights.
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