Corporate travel and ticket sales of premium seats are down. Overall demand is weak. And fuel prices are rising -- again. The one-two-three punch could be bad news for consumers this fall, as airlines face pressure to raise fares or cut more capacity to cover their costs.
Executives at several airlines, including Delta, Southwest, US Airways, Continental and American, gave bleak outlooks Thursday during an investor conference in New York, and there was little talk from anyone of a near-term rebound. AirTran offered a bright spot amid the industry woes, as its chief financial officer said the discount carrier expects to have "one of the best years in the company's history."
The rise in unemployment and hits Americans have taken to the value of their homes, coupled with the meltdown in the financial markets, has caused a significant slowdown in air travel. Airlines also have lost business from the swine flu, which has caused some people to cancel travel plans to Mexico.
The overall drop in demand has coincided with a recent increase in fuel prices, which means lower sales -- one executive said industry passenger revenues have declined nearly 20 percent in the first four months of the year -- are meeting higher costs.
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If fuel prices continue to climb into the fall, airlines will be under pressure to raise prices or cut more capacity to cover their costs, Delta President Ed Bastian said. Delta has made a decision not to "put seats out into the marketplace if we can't recover the cost of that seat," he said.
Experts have said they don't expect fare sales to end anytime soon, given weak demand for air travel.