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Published on : Tuesday, May 19, 2015
According to projections released by Airlines for America, US carriers are expected to face record traffic this summer as the US economy recovers. The group has projected a 4.5% year-over-year (YoY) increase in traffic for the period June-August 2015.
Airlines for America said in its report that it expects 2.4 million passengers to fly between June and August, with a total of 222 million passengers travelling via air. The expected traffic this summer is likely to mark a record high in the industry’s history. During the same time last year, 104,000 less passengers per day, compared to the projected 2015 summer traffic, chose to travel via air.
Out of the total traffic, the industry trade group believes that 31 million passengers will be travelling on international routes, which is equivalent to 332,000 passengers per day. Citing published airline schedules, the highest demand is expected to be for non-stop flights from the US to Canada, Mexico, the United Kingdom, Germany, and Japan, in order.
The group said that the record traffic expectations were based on the recovery in the US economy, leading to greater jobs and in turn increasing the demand for air travel. The group’s vice president and chief economist, John Heimlich said: “The continued rise in U.S. consumer sentiment and employment is leading to more people traveling more often; and air travel remains one of the best consumer bargains in America.”
Mr. Heimlich added that the increased traffic expectations stem from the fact that 13 of the 15 busiest air travel days fall in summer, increasing demand substantially. He believes that the airlines operating in the country will be be able to meet the heightened demand, as the carriers have been increasing their capacity through flight additions and more seats per plane. Moreover, the companies have been adding larger aircraft to their fleets.
In an effort to cater to the heightened demand expected this summer, airlines are increasing their seating capacity by 4.6% YoY, adding 126,000 seats per day during the period. Moreover, airlines have been recruiting more staff to ensure satisfactory customer experience.
According to the data collected by the group, the 10 airlines collectively reported a 3.1% YoY increase in their operating revenues during the quarter, while costs were 6.7% lower than those reported in the same quarter last year. The decline in costs was largely driven by the falling crude oil prices, which fell 32.9% YoY on an average for the 10 carriers. Profits came in at $3.1 billion for the carriers, representing a net profit margin of 8.4%.
The companies had collectively spent $3.6 billion on capital expenditures during the quarter, with the group expecting the companies to have capital expenditures of more than $14 billion for full-year 2015. The airlines are scheduled to receive 367 aircraft during the year. Mr. Heimlich stated: “In the first quarter, airlines invested more than $20 per passenger in capital improvements, taking care of employees, continuing to pay down debt and returning cash to shareholders.” He said that the lower, and still volatile, prices of crude oil had benefited the industry during the quarter, and “are helping US airlines close the gap to average US corporate profitability.”
Mr. Heimlich was quoted to have said in the Airlines for America press release that the performance of the carriers was commendable, considering the headwinds faced by the group during the quarter. During the quarter, the industry had faced headwinds in the form of harsh winters, and had entered the year with $66 billion in debt.