Business

Airlines see profitable summer ahead of iffy fall

DALLAS — This promises to be a moneymaking summer for airlines, with planes full of passengers paying higher fares than they did a year ago. But there could be a fall chill in the air. Leisure travelers say they're cutting back on travel because of high-priced tickets, concern about the economy, and the need to spend more for everything from food to gasoline.

Airlines are planning to reduce flights once summer ends. Some are already offering sales to fill their planes when vacation season is over.

"We are worried about what happens after Labor Day," says Helane Becker, an analyst for Dahlman Rose & Co. "We're going to see less demand and more discounting."

Economists have lowered growth forecasts after a bunch of recent bad economic news. Unemployment remains above 9 percent. Retail sales are slumping for the first time in nearly a year. Becker worries that could foreshadow a drop in leisure travel, offsetting continued strength in business travel.

People who bought their airline tickets before those grim headlines helped push May air traffic above last year's levels, especially on international routes. Discount airlines including Southwest and JetBlue grabbed a bigger share of the U.S. market as vacationers and even business travelers tried to save money.

Travelers helped Southwest boost its May traffic 10.9 percent over a year ago. JetBlue increased traffic 10.6 percent, but growth was much slower at Delta and American, and traffic fell slightly at United and Continental.

Whether their traffic was up or down, higher airfares still boosted revenue.

United Continental Holdings said revenue per seat jumped 14 to 15 percent from a year ago, not including money from extra fees.

The average flight in May was more than 83 percent full, an occupancy level unheard of a few years ago. And it could go higher in June, July and August.

And they're making more from fees — $5.7 billion last year from checked bags and reservation changes, the government said this week.

The airlines need a big summer to offset jet-fuel costs, which are up about one-third from a year ago. If fuel stays at $3 a gallon, the industry's bill for 2011 will be $54 billion, an increase of $15 billion over last year, according to a trade group. This week, JetBlue and AirTran rolled out sales that run into late 2011, indicating a need to fill seats.

Henry Harteveldt, a travel-industry analyst for Forrester Research, said airlines could cut even more flights than currently planned, making it harder to find a cheap fare. Travelers say deals are already scarce, and that's causing them to rethink travel plans.

Joan Spurlock, a physical therapist in Fort Worth, Texas, said her family's flight to Grand Cayman will cost $650 each in airfare, about one-third more than the trip did two years ago.

"We'll travel less often," she said. "It's both higher fares and the economy."

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