Airline Industry to Face New Challenges as Recession Ends
By Amanda Santala"Recession Is Over" headlines blared last week. After analyzing key economic data for August, the nation's top economists assigned the most severe recession since the Great Depression to history. A 12.8% annual increase in the index of leading indicators over the past three months led economic analysts to proclaim that the "contraction" has ended. For the first time in 19 months manufacturing indicators rose, led by a surge of new orders. August also saw a slowdown in the job-loss rate, although unemployment continued to rise in about half of the country's major metropolitan areas.
However, pronouncements of the recession's end were quickly tempered by cautionary statements that recovery will take time, possibly years. And don't expect things to return to the way they were. The depth of the recession and the unsustainability of the inflated economy that preceded it are forcing America to recalibrate. No one's sure what the new "normal" will look like, but changes are coming.
So what does this mean for the aviation industry? With money tight, savings decimated and jobs on the line, Americans have been traveling less. In August, American Airlines reported an 8.1% decrease in traffic, and United's traffic was down 5.8%. As demand has declined, major carriers have reduced seat capacity. In August, American’s capacity dropped 9.4%; United’s fell 8.9%. International carriers which draw from a greater passenger pool have experienced less loss. Continental Airlines reported a 3.9% decline in August traffic resulting in a 6% reduction in seat capacity.
On the plus side, offering passengers fewer flight choices has increased load factors, or number of filled seats per plane, allowing major carriers to operate more efficiently. American's load factor rose from 83.5% to 84.7%, and United's load factor increased from 84.3% to 87.2% over the past year. Continental reported record load factors.
