Despite economic uncertainty, airlines are seeing good times

Despite a debt crisis in Europe and uncertainty over the global economy, travel demand from businesses and consumers is holding up.

Airlines reporting 2011 and fourth-quarter earnings in recent days - generally beating analysts' estimates - said 2012 was starting off strong.

"It appears that the underlying economy is better than the macro headlines would lead you to believe," US Airways Group Inc. president Scott Kirby said.

The second week in January is typically the busiest booking week of the year, Kirby said, as leisure travelers start planning spring-break and summer vacations, and business travelers return from the holidays and plan their initial trips in the new year, Kirby told investors.

US Airways' booked revenue was up 35 percent in that week, and booked corporate revenue was up "almost 30 percent" this year, Kirby said.

"If anything, the new year has seen a step up in business demand," he said. "The pricing environment also remains strong, and the industry is successfully recovering high fuel prices."

That sentiment was echoed at Southwest Airlines Co., Delta Air Lines, and JetBlue Airways, where fourth-quarter net income almost tripled on strong holiday bookings and mild December weather in the Northeast.

Travel agent Kate Murphy, president of Wings Travel in Blue Bell, said the volume of calls "has been unbelievable" from people wanting to make travel plans - corporate, leisure, and group meetings.

"We're busy on every end," Murphy said. "The economy is not fabulous, but it's stable. We saw an uptick starting in November.

"We are ahead in every aspect of our leisure business," Murphy said. "We are doing destination weddings, honeymoons, and 'baby moons' " - getaway vacations before the arrival of a new baby. "We have not seen companies cutting back at all."

Business travel in 2011 finished ahead of expectations and was projected to grow faster than the overall economy in 2012, the Global Business Travel Association said in its latest quarterly outlook Jan. 10.

Overall business travel spending was expected to increase 4.6 percent, mainly due to higher travel prices. International business travel was expected to outpace domestic travel, the group said.

"We see business travel remaining healthy and growing at a steady rate that outpaces GDP growth," Michael McCormick, executive director of the association, said. Corporations remain cautious as the European economy teeters on the brink. "But because business travel drives corporate growth, we should expect road warriors to remain busy in 2012."

Although oil prices are high, most U.S. airlines were profitable in 2011 because they raised fares, cut nonfuel costs, kept a lid on seat capacity, and packed planes fuller.

Airlines offset rising jet fuel expenses by reducing their flying - cutting flights, destinations, or switching the size of airplanes - and retiring less-efficient aircraft.

Airfares went up on average 12 percent last year, according to the travel website FareCompare.com. Even with higher fares and a fragile economy, airplanes are flying more than 80 percent full.

Southwest CEO Gary Kelly said last week travel demand "has just been very steady, very stable, very strong," and that has continued this month.

Delta said its transatlantic revenue was up 17 percent in January compared with a year ago, and trends looked strong for February and March. "In the Pacific, we're seeing steadily improving demand trends," Delta president Edward Bastian said. The outlook for Latin America, Mexico, and South America also was solid, he told investors.

J.P. Morgan airline analyst Jamie Baker said in a client note that airlines were poised for a third consecutive year of profitability, which would be the longest profit stretch since September 2001.

"We believe the industry continues to evolve into one increasingly in control of its own destiny," Baker wrote.

Dahlman Rose & Co. airline analyst Helane Becker said she expected "improving earnings in 2012" because carriers took steps to trim unprofitable flights and because of strong bookings in the United States and Latin America.

United, the world's largest airline after merging with Continental Airlines, said the majority of its global corporate accounts expected travel volume to be "flat to up" and travel spending to "moderately increase" this year, chief revenue officer James Compton told investors.

"We continue to believe we should hold our capacity flat with a downward bias for 2012. That said, core passenger demand remains stable and solid."