bookings suggested the industry might have
“But we don’t know how long we will
bounce along the bottom,” said Jeffery
Smisek, Continental’s president, COO and
director, who has been named to succeed
Lawrence Kellner as CEO.
Part of the uncertainty among executives springs from uncontrollable issues
like the flu pandemic and the continued
volatility of fuel prices.
Delta attributed a revenue hit of between $125 million and $150 million to
swine flu concerns, mostly in its point-of-sale Asia traffic.
Southwest reported a $20 million loss
due to flu worries, while both Continental and United estimated their flu-related
losses at about $50 million each.
“The H1N1 flu epidemic had an impact
on demand in Latin America and the Pacific,” said John Tague, United’s COO, who
was named president last week. “Large capacity reductions in the region reflect the
pull-down in capacity to Mexico that we
implemented after H1N1. We’ve begun to
add the capacity back to Mexico, and we
will be back at our full schedule by the end
of the third quarter.”
Smisek said: “We are closely monitoring
the impact of H1N1 in regions currently
season, such as
and in particu-
where we have
seen recent out-
breaks. We will
should we need
to make tem-
as the winter flu
season sets in.”
Continued from Page 10
Carriers can easily tweak capacity to
compensate for flu-related losses, but
adjusting operations to deal with roller-coaster fuel prices is another matter.
While Air Tran’s fuel costs were down
by more than half during the reporting
period and Southwest’s were down by
more than a quarter compared with
a year ago, the per-barrel price of fuel
jumped by $20, to
$70, between April
“Rising fuel costs during the second
quarter and now into the third quarter are
a huge concern,” Kelly said.
Flu and fuel aside, what’s really keeping
airline executives up at night is international and business travel. Carriers depend on
those higher-fare passengers to raise yields
and provide a steadier cash stream.
“What is really hurting is the lack of international strength and the lack of business demand,” said Arne Haak, Air Tran’s
senior vice president of finance, treasurer
said, “You look at
more business-oriented, high-frequency markets and
they are off across
the country in
Kelly added, “The sudden collapse of
the financial markets in September-Oc-tober just spooked the whole world. And
I’ve heard many experts describe this as
a credit-induced recession. So it’s fear.
And it’s followed through with companies
cutting back sharply and consumers also
Flu and fuel aside, what’s
really keeping airline executives up at night is international and business travel.
cutting their spending simultaneously. To
me it’s as simple as that. It is a very deep
recession; it was not anticipated by many.
You’re going to see the adjustments to that
collapse rolling out over time.”
Not surprisingly, airlines are being cautious about interpreting their booking
data too optimistically.
“We have seen stabilization in business
demand and, candidly, have seen a bit of
an uptick,” said Delta’s CEO, Richard H.
Anderson. “But I think it’s very early to
be trying to call that a trend, and we want
to be certain that we are planning on the
“We are not in a position yet to call it
a long-term trend,” Anderson added. “We
need to get past the end of August and get
some visibility into the fall period and get
a better view of what some of the macroeconomic indicators will be September
Allegiant’s good fortune continues: Q2 profit up 800%
For the second quarter, Allegiant increased its revenue by 12.5%, to $148 million.
Editor in Chief
column, From the
Window Seat, will
resume in the
Aug. 3 issue.
Small Allegiant outshone other airlines for
the second quarter, increasing its quarterly
profit by 800% and producing a net profit
margin of 25%.
While other airlines reported revenue
declines for the quarter as they cut capacity
out of their networks, Allegiant increased
its revenue by 12.5%, to $148 million, and
managed a net profit of $23.9 million.
One of the ways the airline made up for
the lower prices was by filling seats. Allegiant reported a load factor of 90.8% for
The airline managed to increase its revenue even while its average fare on scheduled
service declined 22%, to $65.16 per ticket,
not including ancillary revenue. Including ancillary revenue, the average fare was
$97.52, down 12.4% from last year.
“We had another very good quarter, our
third highly profitable quarter in a row,”
Allegiant CEO Maurice Gallagher said. “In
these extremely difficult times when our industry has substantially reduced its operations and seen record declines in unit rev-
enue, we are pleased to report these quality
While other airlines are dropping or shifting routes, Allegiant continues to grow its
network. The carrier opened a new Southern California base offering seven new
routes from Los Angeles Airport on May
1. Gallagher said the Southern California
routes are off to a
great start, with
load factors running ahead of projections.
diversifies our exposure to regional
economies and offers more protection to us in these
In addition, Allegiant added a new
Beach, S.C., and has increased the number
of small cities served to 60 from 51 in the
past year. The airline now has 134 routes, up
from 100 a year ago.
The airline also inaugurated a Cuban
family charter program in the second quarter, operating between Miami and four cities in Cuba.
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