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Airline Flight Loads to Increase

The industry says that seats will be tougher to come by this summer. Fares could rise further.

April 07, 2006|From Reuters

Fewer seats and a strong economy are expected to result in higher passenger loads on domestic flights this summer.

"I definitely think capacity is going to be tight this summer. Demand is going to be strong," said Standard & Poor's equity analyst Jim Corridore. He said airline load factors in the U.S. probably would approach 90% in the summer months. The average load factor last summer was just above 80%, he said.

Data from the Air Transport Assn., an airline industry trade group, show that the number of seats available on domestic flights declined 1.7% from March 2005 to March 2006. Capacity on international flights increased 4.9% during the same period.

The domestic capacity reduction largely was the result of cutbacks by traditional carriers and the demise of low-cost carrier Independence Air in January, the association said.

In addition, bankrupt carriers Delta Air Lines and Northwest Airlines canceled leases on dozens of planes, further reducing seat availability.

Major carriers, meanwhile, have been shifting their capacity from domestic routes to more lucrative international ones.

Fewer seats means airlines will find it easier to raise fares. Ticket prices have been inching higher since last year. The Air Transport Assn. says fares, which have been affected by rising fuel prices, are up more than 10% this year.

Still, they remain down 16% from peaks reached before the Sept. 11 attacks.

Airlines, some of which have already been struggling with flight delays, will be put to the test as they try to move more passengers through their systems with fewer resources, said Gerald Bernstein, an airline consultant at the Velocity Group.

He noted that passenger traffic is up 7% to 8% from last year and that many carriers have cut payrolls as part of labor cost reductions. This scenario is likely to result in delays and frustration among travelers, he said.

"It's what's called the misery index. I think the misery index will be up this summer," Bernstein said.

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