Major domestic airlines this week and last reported signs that corporate travelers are returning to the skies, including a slow migration back toward the front of the plane, more bookings within a 14-day window and growth in overall corporate spending and traffic. Still, carriers reporting fourth-quarter financial results cautioned that corporate travel recovery remains a slow and delicate prospect with progress skewed by comparing end-of-the-year trends to the abysmal close of 2008.
Continental Airlines executive vice president and chief marketing officer Jim Compton summed up airline sentiment: "We are seeing business traffic come back slowly, but we're stressing the word slowly."
Meanwhile, this week Delta announced plans to invest $1 billion through mid-2013 on customer experience upgrades, including several that focus on premium-class travelers and customers with elite frequent flyer status.
Continental's Compton said corporate bookings this quarter are growing, and in some cases booking windows have narrowed as evidenced by a "pickup in bookings inside of 14 days." Still, yields are soft, he said, and some corporate accounts remain under travel budgetary restraint, even though some "are beginning to ease some of their travel restrictions, such as allowing employees to book in the front cabin again."
Compton said, "We are seeing business travel slowly come back. In addition to easing restrictions on front-cabin bookings, some accounts are permitting travel for internal meetings, which have stimulated a small pick-up in our bookings related to group meetings." He added that the carrier is witnessing growth in the financial services sector-which includes many longtime patrons of premium cabins.
Declines in overall premium yield-which for Continental includes corporate business-hit a low in May 2009 when the carrier witnessed a 38 percent year-over-year, Compton said. In December, Continental said that number was down by only 1 percent.
Continental CEO Jeff Smisek, leading his first earnings call since taking the helm at the beginning of the year, said, "We're a long way from being out of the woods," while cautioning that such positive-looking revenue trends were the "result of very weak year-over-year comps as the economy and business travel began their steep downward slide in the fourth quarter of 2008."
American Airlines CFO Tom Horton painted for investors a similar picture, pointing to signs that "business travelers are getting back out on the road" after the carrier's May 2009 low point, when corporate revenues were down 35 percent.
Horton reported flat corporate revenue in November and December and an increase in corporate passengers for that period-"and that is the only instance we saw of that during 2009," he said.
Despite the easier comparisons to late 2008, Horton said even when compared to 2007, "It's a positive trend." He added that American is "seeing a return in international premium travel," though he noted that the yield of that business is lower than pre-2009 levels.
CEO Gary Kelly, whose Southwest Airlines is less vested in corporate revenue, said short-haul markets continue to lag behind others, which he saw as a sign of remaining "softness in business travel." Kelly last week told investors that the decline in business travel during the recession has been worse than expected, but added, "It hasn't gotten worse since summertime. If anything, it may have gotten better. We are certainly not seeing a large return of business traffic, nor are we predicting that for 2010."
United Airlines' corporate revenues are up 10 percent this month compared with the same period in 2009, said United CFO Kathryn Mikells. There had been a steady improvement from when its corporate revenues reached bottom in May with a 42 percent year-over-year decrease. Before returning to year-over-year growth, United's corporate revenues were down 4 percent in December compared with December 2008.
During the fourth quarter of 2009, United's ancillary revenues accounted for $250 million or $13 per passenger, according to COO John Tague. Full-year 2009 ancillary revenues reached $1.1 billion. Executives said more than $80 million will be added to that mix in 2010 from this month's match of competitors in raising its first and second checked baggage fees $5 to $25 and $35, respectively.
JetBlue Airways, which today reported a full-year 2009 profit of $99 million, said it expects this year to increase capacity by up to 7 percent, including a 6 percent to 8 percent increase in capacity during the first quarter. It added, however, that this capacity would be centered on its Boston and Caribbean markets, and capacity would be cut in the rest of its network.
US Airways Group today reported improved net losses for fourth-quarter and full-year 2009 as compared with 2008 results. The 2009 net loss for the fourth quarter was $32 million, compared to $222 million in the fourth quarter of 2008. For full-year 2009, it reported a net loss of $499 million versus $808 million for 2008.
"Our fourth-quarter and full-year results reflect the extremely difficult environment the industry experienced in 2009," said US Airways chairman and CEO Doug Parker. "Given that environment, we are particularly pleased with the significant improvement in financial performance versus 2008. The actions we have put in place to address the challenges of the past two years-capacity cuts, a la carte revenues, cost control and a commitment to efficient operating reliability-are working. We enter 2010 with encouraging momentum and well positioned to take advantage of the improving economic environment."
Delta Air Lines CEO Richard Anderson in an interview with
BTN last week said the carrier was up year-over-year this month on corporate tickets issued. "Now you've got some easier comps from a year ago, but we see steady improvement," Anderson said. "Yield is better year on year, but it's not where it was in the fall of 2008. We hit the low point in June of 2009, and we've been sort of steadily climbing out from that low point."
In the company's fourth-quarter and full-year 2009 earnings call this week, Delta announced that transactions among its corporate accounts are up 10 percent in January, compared with the same month in 2009.
Delta reported a net loss of $225 million, excluding special items in the fourth quarter of 2009, a $285 million increase from the fourth-quarter of 2008. Special items primarily are comprised of Northwest Airlines merger-related expenses. Full-year net loss was $1.2 billion for the airline, but excluding special items, Delta had a 2009 net profit of $291 million. For full-year 2009, Delta's passenger revenues decreased 13 percent year over year to $5.78 billion.
The company forecasts system capacity to be down 3 percent to 5 percent compared with the first quarter of 2009. Domestic capacity is expected to decrease 1 percent to 3 percent and international capacity down 5 percent to 7 percent year over year.
Anderson said in 2010 the airline would continue to grow its ancillary revenues, which now is a $4 billion segment of the airline industry. During the fourth quarter of 2009, baggage fee revenues increased $75 million, according to Delta president Ed Bastian. In 2010, Bastian said Delta expects the company's ancillary revenues to grow to more than $500 million from increases in revenues from baggage fees, sky miles and its aircraft maintenance, repair and overhaul business.
AirTran Airways, too, expects to expand ancillary fees. "I do believe there's more things that we can do and will be doing going forward," said senior vice president of marketing and planning Kevin Healy, without offering specifics but adding, "it will be a bit slower." AirTran yesterday announced a fourth-quarter profit of more than $17 million and an annual profit of nearly $135 million.
Meanwhile, as part of a 3.5-year customer experience strategic plan, Delta will install full flat-bed seats in BusinessElite class on 90 transoceanic aircraft, add on-demand in-seat audio and video throughout economy class on an additional 68 aircraft and in-seat entertainment centers for BusinessElite and economy class on all wide-body planes, which are used on transcontinental and transoceanic routes.
Delta also is expanding use of first class cabins on regional jets to an additional 66 aircraft operated by Delta Connection carriers ASA, Comair and SkyWest. Once complete, the carrier will have 219 regional planes with first-class seating, furthering an industry trend
(BTNonline, Oct. 5, 2009).
Delta also will expand its Los Angeles Sky Club lounge and open new lounge locations in Seattle, Philadelphia and Indianapolis.