Airplanes are filling up again and airline stocks are doing pretty well. For the first quarter of 2010, the US Department of Transportation reports that 135 million passengers filled airline seats, compared with about 127 million in the same period a year ago. However, the airlines also bumped about 220,000 ticketed passengers, an even sharper rise compared with about 175,000 in the same period a year ago.
Passenger increases were highest at Delta Air Lines Inc. (NYSE: DAL), primarily due to its merger with Northwest. AMR Corp. (NYSE: AMR), parent of American Airlines, UAL Corp. (NYSE: UAUA), parent of United Air Lines, and Continental Airlines Corp. (NYSE: CAL) both flew slightly fewer passengers. Southwest Airlines Co. (NYSE: LUV) and JetBlue Airways Corp. (NASDAQ: JBLU) flew more passengers. (See related article, US Air, Delta and Other Airline Stocks Fly High in May)
Interestingly, the airlines that bumped the fewest passengers was JetBlue, which reported just seven involuntarily bumped fliers, for a rate of just 0.01 per 10,000 passengers. Southwest involuntarily bumped the highest number of passengers, 4.59 per 10,000 passengers.
Combined, all airlines involuntarily bumped 1.73 passengers per 10,000, compared with 1.35 per 10,000 in the same period last year. Involuntary bumpings reached 1.19 for all of 2009, the highest number in 13 years.
The Secretary of Transportation proposed a regulation change on June 2nd that would make if far more costly for airlines to bump passengers, either voluntarily or involuntarily. If passengers are bumped involuntarily and arrive at their destination airport within two hours of the originally scheduled time, the airlines would pay compensation of $650. If passengers were more than two hours late, compensation would double, to $1,300.
The airlines will certainly fight that change, arguing that they need to overbook slightly in order to fill the seats of passengers who cancel at the last minute. There is some basis for that argument, and unless the rules don’t prevent it, what they are likely to do is raise the fees they charge to passengers who make last minute schedule changes. After all the argument goes, these are the folks who force the airlines to overbook, so they should have to pay the fees.
An industry trade group, the Air Transport Association, reports that passenger yield, a measure of revenue performance based on ticket prices, is up 14.1% in May over May 2009. Overseas flights performed even better on routes to Europe and Asia, up 28.3% and 25.2%, respectively. Routes to Latin America were also up 10.9%.
The recovery in air traffic, and air lines’ revenues, is a result of fewer routes on fewer planes combined with higher fares and countless fees. That combination will be fine-tuned over the summer, but it’s not likely to change substantively, even if the Transportation Department succeeds in raising penalties.
Air lines’ shares are mixed this morning, with Southwest and JetBlue up slightly while Delta, American, and United are slightly down.
