- The Washington Times - Thursday, June 21, 2001

The major U.S. airlines last month posted their biggest drop in revenue in 25 years thanks to cutbacks in business travel.
Unit revenue — the best way to measure revenue in the industry — fell 11.8 percent from a year earlier while total sales fell 10 percent, according to the Air Transport Association, the trade association that represents the leading U.S. airlines.
Junes outlook isnt much better, despite a slightly higher mix of summer leisure travel than business travel. Business travel makes up at least 50 percent to 60 percent of airline revenue.
"Companies are cutting back," said Mike Boyd, president of the Boyd Group, a Colorado-based airline consulting and research firm. "When youre laying off 3,000 people, youre not going to increase your travel budget."
The airlines revenue from business travel was down about 14 percent to 15 percent in May, according to a report by Samuel Buttrick, an analyst for UBS Warburg. The declining unit revenue — revenue for each airplane seat flown one mile — was the worst since 1976.
"Its very bad out there, with most corporations very effectively managing travel expense," he said. "Slumping corporate demand remains the primary culprit."
Businesses like Lockheed Martin in Bethesda are watching their costs and cutting back on travel expenses.
The defense contractor makes an annual effort to reduce its travel costs by 10 percent to 15 percent, said spokesman Hugh Burns.
"Every year, we try to reduce our travel budget," he said. "Weve been successful in keeping our costs under control."
The company tends to use alternative means like teleconferencing or combining trips when possible to cut back on travel costs.
But the airlines are feeling the effect of businesses saving money.
"The bad news for us is that its going to be a little while before business demand picks up," said John Heimlich, director of economic and market research at the Air Transport Association.
Junes domestic travel looks slow but not as bad as May, said Mr. Buttrick, who is expecting an 8 percent to 9 percent decline in unit revenue.
"At this level, June will still be one of the poorest months in the past decade," he said.
The number of passengers has not grown this year, Mr. Boyd said.
"Its flat as a tortilla," he said. "We first predicted a 2 percent growth in passenger traffic but now were looking at a 2 percent decline."
Most of the largest U.S. airlines are expected to report second-quarter losses as companies respond to the slowing U.S. economy by reducing high-fare business travel.
The three largest airlines — American Airlines, United Airlines and Delta Air Lines — have said losses in the second quarter will be greater than they forecasted.
UAL Corp., parent of United Airlines, said earlier this week that it expects a "double digit decline" in unit revenue this quarter because of the softening economy and its effect on business travel and higher fuel and labor costs.
Eight of the 10 largest U.S. carriers reported losses in the first quarter. US Airways, based in Arlington, reported a $171 million loss for the first quarter. Passenger revenue per available seat mile dropped 7.6 percent compared with the comparable quarter in 2000.
The U.S. airline industry — excluding leading low-fare carrier Southwest Airlines Co. — is expected to have a combined loss of $1.2 billion this year, said Michael Linenberg, a Merrill Lynch analyst.
This article is based in part on wire-service reports.

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