Airline recovery is taking wing, executives say

Airlines are seeing a business-travel recovery, a return of leisure fliers, and strong bookings heading into the peak summer months.

Speaking at an investor conference in New York on Tuesday, airline executives said passenger revenue was rising compared with a year ago, corporate travel was returning, and revenue trends were positive looking forward.

Because of the strength of the U.S. dollar relative to the euro, travel across the Atlantic is strong and "our trans-Pacific business is on fire," Continental Airlines chief executive Jeff Smisek said at the Bank of America Merrill Lynch Global Transportation Conference.

"I think there is a broad-based recovery. Business travel has been slow to return, but it is returning now."

US Airways Group Inc. said corporate revenues jumped 50 percent in May from a year earlier, though they still were below prerecession levels. The dramatic improvement is a reflection of how far business travel had plummeted.

Corporate and leisure revenue remains down about 5 percent from 2008, said Scott Kirby, US Airways president.

Asked about travel to the Gulf of Mexico and the region near the BP oil spill, Kirby said Philadelphia's dominant airline did not have a large number of flights to leisure destinations on the Gulf Coast. "The rest of Florida is doing fine. Most of our service is to the Atlantic Coast in Florida."

US Airways said it has received an increase in bookings from stranded passengers from Spirit Airlines Inc., which has canceled all its flights through Thursday because of a pilots' strike that began Saturday.

US Airways has seen a "modest" increase in reservations from Spirit passengers who were ticketed through Atlantic City, mostly to Florida destinations, and rebooked flights out of Philadelphia, said airline spokesman Morgan Durrant.

Short-term gains from displaced Spirit passengers "will not have a meaningful impact" on revenues, Kirby told analysts. "I assume it will get settled soon."

At Delta Air Lines Inc., the world's biggest carrier, "We continue to see momentum building in the business, driven not just by the improving economy but also improving corporate volumes," president Edward Bastian said.

Delta expects unit revenues - revenue per mile per paying passenger - will increase 20 percent in the three months ending June 30.

Bastian said the "principal strength" is in international markets, particularly Asia, where unit revenues in June will be up 50 percent. Revenues are up more than 30 percent on trans-Atlantic routes.

Delta corporate ticket sales at the end of May were up 63 percent this year over the same period a year ago.

"The main message I want to get across is that while our challenges are real, I am more encouraged about the future of our company today than I have been in a long time," said Gerard Arpey, chief executive of American Airlines.

American forecast gains in passenger revenue of more than 17 percent for the second quarter.

United Airlines said it expected passenger unit revenue growth of 26 to 27 percent in the second quarter, outpacing analysts' estimates.

"It is quite apparent that the strong revenue trends we first observed earlier this year have at least been sustained," airline analyst Bob McAdoo of Avondale Partners L.L.C. wrote in a client note.

Analysts are watching airlines' revenue projections as an indication the turnaround is gaining traction. U.S. airlines were hit with volatile fuel prices in 2008 and a recession in 2009.

JP Morgan Chase airline analyst Jamie Baker said in an update, "Not only is the industry turning the corner on cash flow and profitability performance, management teams remain focused" on improving balance sheets to hedge against "inevitable downside risks," such as higher fuel prices.

Some airline officials remain cautious. "Business travel, although it's improving, is still nowhere close to fully recovered," Southwest Airlines Co. chief financial officer Laura Wright said. "Unemployment remains very high."

More than half - 60 percent - of Southwest customers are leisure travelers.

Southwest said planes were fuller in April and May, and passenger unit revenues were up nearly 19 percent in April and nearly 20 percent in May. "Our travel for the first half of June and bookings for the second half of June are very strong," Wright said.