Capacity up, revenues down for air

Passenger seats on U.S. transcontinental routes have increased 25% in the past year, according to Samuel Buttrick, an analyst with UBS. Though capacity is still below 2000 levels, heavy discounting is affecting revenues at the air carriers, he continues.

Increased domestic wide-body capacity will extend to the cargo sector, where load factors have inched forward from 53.4% to 53.9% in the last four quarters.

Meanwhile, the International Air Transport Association is forecasting a 7% annual growth rate in global passenger traffic and a 4.4% annual growth rate in cargo shipments for 2004.

Delta Airlines, which saw its own international traffic increase 6% in the first months of 2004, is preparing for a heavy international travel season by adding capacity on international routes and adding its code to flights of its SkyTeam global alliance partners. SkyTeam offers passengers and shippers more than 7,600 daily flights.

In other news, Delta updated guidance on its March 2004 quarter net loss estimate. The estimated March quarter net loss was expected to be approximately $400 million. Delta had previously estimated its net loss to range between $300 million and $350 million. Continued pressures on passenger revenue, sustained higher fuel prices and costs associated with the settlement of fuel hedge contracts drove this revision.

The continuing weakness on the revenue side, coupled with external cost pressures — including but not limited to fuel prices — further illustrate Delta's critical need to reduce costs to a competitive level for the long term.

Domestic Air Cargo (quarterly)

Four quarter moving average

Source: Federal Aviation Administration

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