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American Airlines, Southwest say summer travel is back

Dallas/Fort Worth International Airport

Mary Schlangenstein
(c) 2014, Bloomberg News.
DALLAS — American Airlines Group Inc. and Southwest Airlines Co. forecast a strong summer travel season, a pivotal period for the industry when vacationers join business fliers to pack planes to their fullest.

American said second-quarter revenue for each seat flown a mile, a benchmark for traffic and fares, will exceed the projection it gave just last month. Southwest Chief Executive Officer Gary Kelly told employees he expects "great" seasonal travel.

 

A pickup in air travel would bolster an industry rebound as airlines seek greater pricing power. The summer months are the busiest for U.S. carriers, with passenger traffic peaking in July, followed by August then June, according to data compiled by Bloomberg. An Airfarewatchdog survey of 13,000 travelers found that 77 percent planned to fly on vacation this summer, compared with 15 percent who will drive.

"The U.S. domestic market continues to remain the driver of the overall strong demand" that should push pricing higher through the summer, Helane Becker, a Cowen & Co. analyst, said in a note to investors.

American, based in Fort Worth, Texas, said it expects passenger revenue this quarter for each seat flown a mile to rise 5 percent to 7 percent from a year ago, an increase over its May forecast of up 4 percent to 6 percent. The measure, known as PRASM, is an industry benchmark for traffic and fares.

Southwest, based in Dallas, estimated May PRASM rose 8 percent to 9 percent over May 2013 and said load factor, or the average amount of seats filled per flight, increased 1.8 points to 83.7 percent.

"We had another strong month," Kelly told employees on a recorded message. "It was an all-time record load factor for the month of May and another strong revenue increase. We'll be off to a great summer season. Really strong results for 2014 are continuing."

May traffic reports prompted Joseph DeNardi, a Stifel Nicholas & Co. analyst, to increase his 2014, 2015 and 2016 profit estimates for Delta Air Lines Inc. and his 2015 and 2016 outlook for American's profits.

Delta, the third-biggest U.S. carrier behind American and United Continental Holdings Inc., reported June 3 that PRASM rose 7 percent in May as load factor rose 1.7 points to 86.5 percent.

United hasn't reported May results.

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