- The Washington Times - Tuesday, October 10, 2006

Travelers logged more air miles last month than during September a year ago despite tighter carry-on luggage rules that created long lines at U.S. airports, the industry said.

Continental Airlines reported an increase of 11.5 percent in passenger miles compared with September 2005. It was the largest percentage increase among major domestic airlines.

Low-cost carrier Southwest Airlines showed an increase in passenger miles of almost 10 percent, while United Airlines posted an increase of 1.3 percent, according to the airlines.

Several low-cost or regional airlines also reported increases in passenger miles in September, including AirTran Airways, Alaska Airlines, Frontier Airlines, JetBlue Airways and Spirit Airlines.

“It’s been a pretty good year, and it’s ending up pretty nice with the price of jet fuel coming down,” airline analyst Darryl Jenkins said. “This is a reasonably strong autumn in terms of traffic and fares.”

Even the restrictions placed on carry-on luggage in August after British authorities said they had foiled a terrorist plot to blow up several U.S.-bound planes didn’t stop Americans from flying. Continental, Southwest and United also posted gains in ridership in August compared with a year earlier.

“These shocks generally are short term, and things will come together again as long as there are no major aftershocks,” Mr. Tangorra said.

But to keep ridership levels up after the August security scare, many airlines resorted to discounts, which cut into profits, said Ray Neidl, an airline analyst with Calyon Securities.

“The airlines are discounting [tickets] a little more than they thought they would to keep the load factor and traffic up high, and at this point I’m expecting that to continue,” Mr. Neidl said.

Not all U.S. carriers saw increases, as American Airlines, Delta Air Lines, U.S. Airways and bankrupt Northwest Airlines reported a decline in passenger miles from the same month last year.

But airlines with declining ridership aren’t necessarily in trouble, analysts said. Passenger miles are directly related to the number of paid seats an airline makes available. So the more seats an airline has for sale, the more passengers generally it will have, said Anthony Tangorra, chief executive officer with Latitude Transport Advisory.

“If [an airline] decides to increase capacity 5 percent, you’ll see traffic counts come close to that capacity increase number,” Mr. Tangorra said. “It’s supply-side driven, not necessarily demand-side driven.”

Continental reported a 10 percent increase in the number of seats available for purchase in September compared with the same month in 2005. Southwest and United posted capacity increases of 10 percent and 2.3 percent, respectively.

Conversely, airlines that reported a decline in passenger miles in September all made fewer seats available for sale, records show.

Analysts overall say they are positive about the industry’s near future.

“We’ve had 18 months of really unprecedented increases in fares and traffic, and this will continue as long at the economy stays strong,” Mr. Jenkins said.

In a research note released last week Mr. Neidl lowered his estimates for Continental, United, U.S. Airways, JetBlue, Southwest and American’s parent company, AMR Corp. But he predicts the industry will earn $1.3 billion in 2006.

“I’m still bullish on the industry this year,” he said.


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