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Airlines want full planes as summer ends

The airline industry, struggling to extend a multiyear recovery, will try and keep planes flying as full as possible as it transitions from the hectic summer travel season to a much slower autumn.
/ Source: Reuters

The airline industry, struggling to extend a multiyear recovery, will try and keep planes flying as full as possible as it transitions from the hectic summer travel season to a much slower autumn.

While this summer's traveling has generally consisted of standing in long lines and dealing with packed planes, airlines must continue to limit the number of seats for sale to make the most money possible on each flight.

Top carriers this week reported August flights were extremely crowded. In fact, UAL Corp , parent of United Airlines, said its load factor for the month was the highest it has recorded for the period.

"These are the highest seasonal load factors you'll see except for several days around the holiday periods later this year," airline consultant Robert Mann said. "But what they're looking to do going into the fall and winter is constrain supply growth so as to maintain pricing power."

The airline industry grappled for years with a capacity glut caused by an influx of low-cost carriers.

Major hub-and-spoke airlines, blindsided by smaller, more agile competitors, sought to compete directly by adding flights, and subsequently won a lot of new customers.

While travelers were happy with the airlines' decision — the strategy drove down ticket prices — it exacerbated airline woes. Starting with the September 11, 2001, air attacks, the industry hemorrhaged money due to higher fuel prices, leading industry leaders like United, Delta Air Lines and Northwest Airlines to file for bankruptcy.

But in 2006, airlines made the call to cut capacity, fly fuller planes and begin a series of revenue-boosting fare increases.

The trend toward rising ticket prices continued at a slower pace in 2007. A fare increase by low-cost carrier Southwest Airlines triggered a broader fare increase this month.

"If the supply-demand balance persists, we'll see more of the incremental fare hikes we just saw Southwest initiate," Mann said.

Keep planes full
Several major airlines have yet to report August load factors, but results have been strong so far.

United said its load factor was 86.3 percent, a gain of 2.8 percentage points from August 2006 and a record for the month.

AMR Corp's American Airlines' load factor was 85 percent. Continental Airlines reported an August load factor of 85.9 percent. US Airways Group said its load factor was 85 percent and that demand is healthy.

"Looking forward, we are encouraged as both business and leisure demand remains strong," US Airways President Scott Kirby said in a statement.

At least one expert agreed, saying demand likely will remain strong in the fall and that airlines will do everything possible to ensure that seats do not fly empty.

"September likely will be only a tad below August. Passengers shouldn't expect much relief from the airport crowding problem," DePaul University transportation expert Joe Schwieterman said, referring to the hassles travelers can encounter on full flights.

He said, however, that airlines must plan for delays and cancellations even if it means increasing costs. Some airlines learned this year that running extremely lean operations can lead to major operational problems that strand passengers for hours or days if carriers cannot find seats for displaced travelers.

A February storm caught JetBlue Airways off guard and caused the low-cost airline to cancel nearly 1,200 flights over several days. The debacle cost the company more than $30 million. In June, a computer glitch at United Airlines delayed nearly 270 flights.

Experts say airlines would be better prepared for such disruptions if they had more slack in their systems. Some airlines like American are considering adding more ground time between flights to reduce delays.

"I think airlines have learned that the high load factors have enormous costs when things turn bad," Schwieterman said.