ATW Daily News

Most US majors cautiously optimistic about 2010; US Airways bullish

Thursday December 10, 2009

Several US airline executives yesterday expressed cautious optimism that the revenue environment will improve in 2010, while US Airways President Scott Kirby was outright bullish about the coming year.

Speaking at the Next Generation Equity Research Airlines Conference in New York, available via webcast, executives said demand has improved steadily since September and predicted the trend will continue into 2010. "I anticipate demand to remain strong," Delta Air Lines CFO Hank Halter said.

He added that "there's been a steady step progression" in terms of unit revenue declines slowing over the past four months. "When will unit revenue turn positive? I don't want to be tied to a specific date, but I'd say we'll see it turn positive in the first half of 2010."

Kirby was less hesitant, saying, "RASM will almost certainly turn positive in February and March and I think you'll see every month get better right through December." He stated that a "10% increase in RASM is achievable on an industry level" for full-year 2010. "We've heard from investors that perhaps we've been more bullish than others," he conceded. But he asserted that the projection of a 10% RASM increase assumes "no further improvement in the economy" in 2010. "If the economy improves, I think there's further upside."

Executives from other major US airlines said trends are moving in the right direction but stopped short of embracing Kirby's enthusiasm. "The story of the recovery will be the pace at which business travel picks up," Continental Airlines Senior VP-Finance and Treasurer Gary Laderman said, adding that it's too early to tell how fast business passengers will return to the skies.

Southwest Airlines Chairman, President and CEO Gary Kelly expressed caution regarding 2010. "Business travel still lags," he said. "I don't think it has gotten worse [in recent months], but I'm not comfortable making bold predictions [that it will improve next year]. I'm not expecting strong economic growth in 2010 and likewise I'm not expecting a rebound in business travel."

Kirby countered, "I think we're seeing business travel recovery. I know you've heard otherwise, but we see it. The markets that are doing the best are the markets that typically have the most business traffic. We're certainly seeing evidence of business travel recovery."

by Aaron Karp

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