Tuesday, May 06, 2008

Upstairs, Downstairs

...Or a Tale of Two Cities, pick your allusion.

British Airways today reported that its passenger load factor fell 5.1 points in April, to 71.6 percent, compared with April of last year.

The Easter holiday falling in March of this year had some effect overall, but in general, BA said the basic problem is a decline in long-haul coach traffic, even as business-class and first-class traffic continues growing.

Coach traffic fell 8.8 percent in April, while premium traffic rose 3.4 percent, British Airways said.

Looking at airline performance in general for April, it's increasingly clear that the class-divide in the air-travel market is becoming more pronounced, as is the divide between domestic and international service. That is going to become extremely apparent this summer, as the network carriers continue shrinking domestic routes and concentrating on lucrative international routes (and those domestic routes that feed international traffic).

In a general assessment of what's ahead, I thought Delta's president, Edward H. Bastian, was pretty clear at the JPMorgan aviation and transportation conference in March (which occurred before the Delta-Northwest merger announcement).

Here are some excerpts from his comments that describe what is going on with some clarity through Delta's prism:

--"International growth is the core, the foundation and cornerstone" of Delta's future. "Internationally, we are go to be growing at roughly 15 percent pace in 2008 over 2007."

--"The good thing for us about the international growth is that a considerable amount of it is being funded out of the domestic system."

--"Forty-one percent of our capacity this summer will be flying internationally."

--Some of this domestic capacity reduction will be accomplished by pro-active "day-of-the-week cancellations, as well as holidays."

--This summer, Delta's schedule for international flying will be "up over 77 percent [while] domestic is down greater than 22 percent."

--"We're going to be continuing to rationalize, on the domestic side, point-to-point flying." [My note: That describes many routes that do not feed into hub connections that yield international passengers, and portends further reductions in service at many smaller airports.] "The domestic reductions I mentioned earlier are largely going to be come out of point-to-point flying domestically. We're going to be continuing the strength of our hubs [but] our point-to-point network domestically is subject to rationalization. "

--"Domestic capacity is increasingly being pointed toward feeding international destinations."

--This pronounced trend can be described metaphorically, Bastian said, as "the tale of two cities."


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