Airlines Scale Back Growth After Quarterly Slowdown
<B> Airlines Scale Back Growth After Quarterly Slowdown</B>
By Jay Campbell
While airline profits remained strong in the third quarter, there were signs of softened demand in some areas and the carriers are taking steps to adjust.
American Airlines, which this year and next was looking forward to steady growth for the first time in years, said it would scale back its growth plans and retire 16 aircraft rather than the planned six. The carrier also will delay the launch of several routes, including flights between Tokyo and Boston and New York, as well as between Chicago and Amsterdam (<I>BTN,</I> Oct. 5) and Moscow. The carrier now is planning a 3.5 to 4 percent growth rate for 1999, rather than the initial 6 percent forecast.
AA had been one of the most ambitious U.S. airlines in terms of 1999 expansion. U.S. carriers as a whole were holding capacity in check with just a 1.2 percent growth rate through the first nine months of 1998, said Merrill Lynch. However, 1999 is expected to increase by 5.4 percent, despite the AA slowdown.
"Mixed signals continue to complicate travel market planning for the year ahead," said James Camisa, a travel industry analyst based in Miami. "While travel remains quite solid, some of the recent economic indicators are worrisome."
Internationally, British Airways reported that premium traffic in October declined by 2.4 percent, leading to overall yield reduction. This change, which BA said likely will continue, appears to stem from "a rationalization going on where many senior and middle managers are flying economy rather than premium classes," said spokesman John Lampl. "Our economy class is doing very well, and first is holding up, but J class business seats are down. It's been a general drop in the market, not just BA."
Though BA said that drop includes transatlantic travel, the highest pressure out there is on transpacific travel. Revenue per seat for the airline industry as a whole dropped 19 percent in the third quarter, as did the average fares, said New York-based airline analyst Sam Buttrick of Paine Webber.