Airlines pledge to keep lid on capacity

[Brian Noble]

Not sure if you can read links behind the paywall or not, but this from the Journal today:

http://online.wsj.com/article/SB10001424053111903532804576568922672945908.html

The lead paragraphs:

Major U.S. airlines outlined plans Tuesday to trim domestic flying next year in an effort to keep a recent run of fare increases on track, though executives said demand remained robust.

United Continental Holdings Inc., Delta Air Lines Inc. and Southwest Airlines Co. all plan to maintain the capacity discipline that has helped the industry ride the latest increase in fuel prices, with most of the largest carriers expected to remain profitable this year, aided by cost cutting and gains from the extra fees introduced for services such as checked bags and assigned seats.

 

[jlewisinsyr]

This is good news, because it will help support profitable airlines. I applaud airlines for being responsible in their capacity actions.

Many will knee jerk and call out greed, but unprofitable airlines can lead to bankruptcies, further reductions in capacity and higher prices.

 

[KevGuy]

Just more corporate greed, just like the FCC tax agreement that ran out over the summer, they didn't give anyone a break they just raised ticket prices by the tax amount so they could keep it. But funny I don't remember anyone mentioning the ticket prices being lowered after the FCC got the temp funding to continue?? Wonder why that is, hmmmm....corporate greed perhaps? Ticket prices are way up out of sight and airlines like United/Continental, Delta/Northwest, Southwest/Airtran merge and give us less choice, more fees for bags etc, no competition, and continued high prices. This must be the new american way.....

 

[KevGuy]

Ha, I just clicked on the link above and they want me to pay to read the article at the wall street journal site, give me a break.....

 

[jsilvers]

Just more corporate greed, just like the FCC tax agreement that ran out over the summer

I think you mean FAA. (And a few airlines - such as Spirit - did pass along the savings to consumers during the tax lapse.)

 

[lost*in*cyberspace]

Just do a Google search for these types of articles - they are usually available somewhere for free:

By DOUG CAMERON and JACK NICAS

Major U.S. airlines outlined plans Tuesday to trim domestic flying next year in an effort to keep a recent run of fare increases on track, though executives said demand remained robust.

United Continental Holdings Inc., Delta Air Lines Inc. and Southwest Airlines Co. all plan to maintain the capacity discipline that has helped the industry ride the latest increase in fuel prices, with most of the largest carriers expected to remain profitable this year, aided by cost cutting and gains from the extra fees introduced for services such as checked bags and assigned seats.

Enlarge Image
Airlines
Airlines
Bloomberg News

Delta Air Lines plans to extend its planned 4% to 5% fourth-quarter cut in capacity into the first quarter of 2012.

Airline stocks rose broadly on the comments, as investors cheered the fact that the carriers would continue to show discipline on capacity—the number of planes an airline puts in the sky and seats it makes available, rather than expanding and chasing market share as had happened in other economic recoveries.

Speaking at a Deutsche Bank investor conference, airline executives provided the first guidance that capacity cuts already planned for the fall would continue into next year.

Ed Bastian, the president of Delta, the second-largest airline by traffic, said the airline will extend its planned 4% to 5% fourth-quarter cut in capacity into the first quarter of 2012. The airline plans to cut capacity by 2% to 3% for all of 2012, compared with 2011.

Mr. Bastian said Delta's third-quarter performance was ahead of expectations, helped by buoyant demand and a $70 million sales boost as they kept funds designated for airline ticket-taxes during the shutdown of the Federal Aviation Administration.

Jeff Smisek, United's chairman and chief executive, said the carrier next year will keep consolidated capacity, which includes its mainline flights and those outsourced to regional partners, in line with 2011 levels. The largest U.S. carrier by traffic plans to offset a "modest decrease" in domestic traffic next year with an increase in international flying, Mr. Smisek said, boosted by the expected arrival of the first six of its delayed Boeing Co. 787 Dreamliners.

At the event, Southwest Chief Financial Officer Laura Wright said the airline, the largest carrier of domestic passengers, would keep capacity flat "or slightly down" next year.

Meanwhile, Beverly Goulet, vice president and treasurer of American Airlines parent AMR Corp., said American will reduce its fourth-quarter capacity this year an additional 0.5%. American is taking "a very close look" at its capacity plans for 2012, she added.

Given the long-haul flights American added this year and the transition to planes with more seats, American's capacity is expected to be higher next year. However, Ms. Goulet said that may change.

US Airways Group Inc. President J. Scott Kirby didn't comment on the airline's capacity plans for 2012, but he said the airline's unit revenue is up 13% in September, compared with a year ago.

Airline share prices hit their largest gains in a month, led by US Airways, which was up 16% to $5.64 in 4 p.m. trading. United Continental was up 7.4% to $19.28 and Delta was up 8.3% to $7.99. Shares were up 5.5% to $3.45 for AMR and 4.4% to $8.31 for Southwest. All of the stocks trade on the New York Stock Exchange.
—Susan Carey contributed to this article.

Write to Doug Cameron at doug.cameron@dowjones.com and Jack Nicas at

 

[Brian Noble]

they want me to pay to read the article at the wall street journal site

Because news that people work to gather should be free...

...just like airline flights.

-brian, who subscribes to both the Times and the Journal, for a lot less than he spends on just Mickeybars in a year.

 

[jlewisinsyr]

Just more corporate greed, just like the FCC tax agreement that ran out over the summer, they didn't give anyone a break they just raised ticket prices by the tax amount so they could keep it. But funny I don't remember anyone mentioning the ticket prices being lowered after the FCC got the temp funding to continue?? Wonder why that is, hmmmm....corporate greed perhaps? Ticket prices are way up out of sight and airlines like United/Continental, Delta/Northwest, Southwest/Airtran merge and give us less choice, more fees for bags etc, no competition, and continued high prices. This must be the new american way.....

Business should not be required to run at a loss. These airlines employee thousands of people and need to raise enough revenue to support their profitability, to stay in business. Airlines are not a not-for-profit, nor should they be.

 

[Lewisc]

There isn't anything wrong with a news website charging, although very few been able to attract a significant number of paying subscribers. Linking to such a site is OK (JMO) in this case. The OP said it was a paysite and posted a summary of the article. I only have an issue when a person posts a link to a pay site but doesn't offer a summary. People who want to read the entire article can either pay or find the same information in another site.

Reducing competition (mergers) aren't always in the public interest. It can lead to higher prices. Fares to leisure destinations like Orlando have been priced at unprofitable fares. I suspect it's going to be much harder to grab the very low, unprofitable fares we used to get.

 

[DCTooTall]

Add another person who can't really find fault with the decision. While the fact my preferred flight times are harder to get... and ticket prices are much more expensive than I paid a few years ago, Ultimately I have to agree that for the long term, it's a good thing.


Why?

As others have pointed out... Profitable airlines are in our best interest. An Airline that is profitable will continue to operate flights, meaning a better chance of their being an option in the future when I need/want to fly someplace.

Profitable Airlines provide jobs to other people... which in turn helps provide wages and income to families and people which helps fuel the economy. (seriously, another bankrupt airline or airline union needing to accept massive cuts to nearly unlivable levels isn't going to help much.)

The simple fact is that fuel costs are a LOT more expensive than they were 10 years ago. Costs for everything have gone up, so how can it make sense that flights for the past couple years have been the same price or cheaper than they were 10 years ago?

 

[Brian Noble]

To be clear, I don't think it's a bad (or necessarily a good) thing either. I expect the airlines to retain this capacity discipline going forward too, because it has helped them stay profitable despite some nasty oil price swings. They've discovered that charging more to fewer people earns them more money than the other way around. I posted it mainly so that folks could take it into account when thinking about what "good" fares might be in the next six months or so.

(Hint: it's probably going to be higher than it has been in the past.)

 

[kaytieeldr]

And when you calculate airfare on a per-mile basis, it's still cheap!

 

[OrangeCountyCommuter]

Just more corporate greed, just like the FCC tax agreement that ran out over the summer, they didn't give anyone a break they just raised ticket prices by the tax amount so they could keep it. But funny I don't remember anyone mentioning the ticket prices being lowered after the FCC got the temp funding to continue?? Wonder why that is, hmmmm....corporate greed perhaps? Ticket prices are way up out of sight and airlines like United/Continental, Delta/Northwest, Southwest/Airtran merge and give us less choice, more fees for bags etc, no competition, and continued high prices. This must be the new american way.....

As opposed to the "old American way" where companies run to DC and ask the government for a bailout when they are about to go bankrupt. Maybe it is just me but I don't think my tax dollars should finance your cheap flights!

 

[ExPirateShopGirl]

FCC? Do you quite possibly mean the FAA?

Do you know why most airlines raised fares during that time period? So if the FAA decided to retroactively collect taxes on those tickets (from the airlines) once reauthorization occurred they would have the funds to do so.

Just more corporate greed, just like the FCC tax agreement that ran out over the summer, they didn't give anyone a break they just raised ticket prices by the tax amount so they could keep it. But funny I don't remember anyone mentioning the ticket prices being lowered after the FCC got the temp funding to continue?? Wonder why that is, hmmmm....corporate greed perhaps? Ticket prices are way up out of sight and airlines like United/Continental, Delta/Northwest, Southwest/Airtran merge and give us less choice, more fees for bags etc, no competition, and continued high prices. This must be the new american way.....

 

[Greysword]

Not sure if you can read links behind the paywall or not, but this from the Journal today:

http://online.wsj.com/article/SB10001424053111903532804576568922672945908.html

The lead paragraphs:

Good for them! I'm happy to see good old supply and demand in action.

Personally, I think there has been a glut on the air transportation market for quite some time. Inexpensive fares to many more destinations has certainly had an impact on our society, and hopefully we are seeing an adjustment to make flying closer to the special event it used to be.

Just more corporate greed...Wonder why that is, hmmmm....corporate greed perhaps? Ticket prices are way up out of sight and airlines like United/Continental, Delta/Northwest, Southwest/Airtran merge and give us less choice, more fees for bags etc, no competition, and continued high prices. This must be the new american way.....

I guess you don't remember the "good old days" (1990s and earlier) when flying cost $1,000+ per person out of many destinations and only one major airline serviced lots of smaller cities...yep, the good old days. I know! We should scrap the $300-$400 airline tickets and go back,since $300 is way to expensive!

 

[jsilvers]

Do you know why most airlines raised fares during that time period? So if the FAA decided to retroactively collect taxes on those tickets (from the airlines) once reauthorization occurred they would have the funds to do so.

The IRS, not the FAA, collects these taxes, even though the taxes lapsed for a time because the statutes authorizing them were part of a package of FAA-related laws that Congress failed to re-authorize.

Also, there was some debate as to if the IRS could actually collect the taxes retroactively from airlines (but I'm not disagreeing that it was wise to set aside funds in case it tried). The thinking seems to be that because the airlines are middlemen for the purposes of tax collection, if they were practically unable to collect a tax owed by passengers, the IRS's only remedy would be to go after passengers directly, not to require airlines to pay out of their own pockets.

In any case, the taxes were restored retroactively, but the IRS decided not to try to actually collect them, with limited exceptions.

 

[ExPirateShopGirl]

oh boy