War, SARS Sour Airline Traffic As U.S. Hotel Occupancy Stays Relatively Flat

March traffic reports issued this week by U.S. carriers showed a substantial impact from the war in Iraq, while foreign carriers were plagued both by the war and fears about the severe acute respiratory syndrome reported in southeast Asia. By contrast, U.S. hotel occupancy rates held fairly steady for the week of March 23, the first full week of the Iraqi conflict.

American Airlines' March systemwide traffic, measured in available seat miles, fell nearly 5 percent year over year. United Airlines was down 5.7 percent, both Delta and Continental airlines reported traffic declines above 8 percent and US Airways' declined more than 16 percent. For most, transoceanic operations suffered the steepest traffic declines, though domestic traffic in some cases also was markedly down. Northwest Airlines at press time had not yet released March traffic reports.

"The potential for war with Iraq during the first few weeks of March had a profoundly negative impact on our business and that of this industry, and we continue to see bookings suffer as a result of this ongoing conflict," said US Airways CEO David Siegel.

US Airways expected mainline passenger unit revenue, measured in revenue per available seat mile, to be down 4 percent to 5 percent last month, compared with March 2002. Continental said its RASM performance in March may have been down as much as 13 percent.

In sharp contrast to the majors, the nation's smaller, low-fare carriers managed to expand traffic in March versus last year. Southwest Airlines reported a 1.1 percent traffic increase. America West Airlines' traffic growth came in at 7.8 percent and JetBlue Airways reported a 76.4 percent increase.

Overseas, carriers are feeling the double-pinch of the war and SARS epidemic. This afternoon, both All Nippon and Cathay Pacific announced fresh capacity cuts, following similar cuts by other carriers in the region. "The combination of atypical pneumonia and war in the Middle East has had a severe impact on our passenger bookings," said Cathay director of corporate planning Augustus Tang.

In Europe, traffic growth in the first two months of the year among 30 airlines represented by the Association of European Airlines largely was offset in March by the war. In the two weeks leading up to the conflict in Iraq, aggregate traffic was flat year over year and then down 2.4 percent. During the week that war broke out, traffic plunged another 12.4 percent.

According to Smith Travel Research, which tracks lodging industry performance in the United States, occupancy rates for U.S. hotels from March 23 to March 29 actually rose 1.2 percent over the same week in 2002, to 59.9 percent. U.S. hotel profits rose as well. Revenue per available room, a key indicator of hotel profitability, was $49.77 for the week, an increase of 3.2 percent over the prior year.