Analysts See Uptick In Airline, Hotel Performance

"A slow, yet steady recovery in air travel/pricing is underway. We are encouraged by recent discussions with the airlines that point to signs of increased future corporate sales activity," said Deutsche Bank Securities analyst Susan Donofrio in a recent research note. "As such, we expect to see airline revenues continue to strengthen."

Donofrio, along with several other industry analysts, recently upped quarterly earnings forecasts for many major U.S. carriers, primarily a result of improving revenue trends. J.P Morgan Securities analyst Jamie Baker, for example, now expects the current quarter will represent "the first emergence of quarterly operating profitability since 2001," following a "pretty respectable summer" for network carriers.

UBS Warburg analyst Sam Buttrick estimated revenue per available seat mile in August increased 7 percent year over year, following an 8 percent jump in July. Continental estimated its August RASM increased 4 percent to 5 percent. US Airways' estimate was percent 6 percent to 7 percent. Buttrick's September forecasts for the industry include an estimated RASM growth of 5 percent percent to 6 percent.

Yields also are moving in a positive direction. Domestic passenger yield, measured as fare per mile excluding taxes, rose 2.3 percent in July, according to the Air Transport Association, representing the fourth consecutive monthly improvement and the first positive growth this year.

Looking ahead into 2004, Deutsche Bank predicted RASM and passenger yield growth each in excess of 4 percent, which would be the best annual industrywide performance for both measurements since 2000.

Meanwhile, the U.S. lodging industry performed above expectations last week, according to statistics released today by Smith Travel Research. The positive results, coming in the first week of September, spur speculation that the fall travel season, normally a busy period for business travel, will be the beginning of an industry rebound. Upper upscale hotels performed especially strong, with revenue per available room, a key indicator of hotel profitability, increasing 3.7 percent over the same week last year. For the quarter to date, RevPAR is up 2.4 percent.