Monday, December 01, 2008

Airline Demand Still Falling

Air-travel demand is evidently continuing to fall at a rate greater than the ability of airlines to reduce seating capacity. This increases the likelihood that airlines will need to reduce fares until they get their capacity in line with demand.

Continental Airlines today was the first to report its operating results for November. The numbers -- all compared with November 2007 -- are compelling:

---Domestic passenger traffic was off 15 percent (and down 5.4 percent internationally).

---Domestic seats available were down 12.4 percent. (So the drop in actual traffic exceeded the drop in seating capacity).

---Domestic average load factors -- the percentage of seats sold on an airplane -- was down 2.5 points, to 83.1 percent (and down 2.4 points to 77.4 percent internationally). Load factors in the 80s are still amazing, meaning that on most flights, every seat is sold -- but the drop is notable.

Meanwhile, shares of U.S. airlines tumbled today. The stock market in general tanked today, of course, but Reuters reports that the airline stock decline outpaced the overfall decline in the Dow Jones average and attributed it to "speculation that [airline] bookings may suffer more now that the nation's economy has officially been declared to be in recession."


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