Airlines benefit from fees, fare increases

10-11% revenue gains expected

DALLAS - American Airlines, Delta Air Lines Inc., and Northwest Airlines Corp., benefiting from higher fares and new fees, expect revenue for each passenger flown one mile to climb about 10 percent this quarter.

So-called unit revenue at AMR Corp.'s American will rise as much as 11 percent for its main jet operations. Delta said its gain would be as much as 10 percent, including its regional carriers, while Northwest estimated an 11 percent gain on that basis for its US routes.

Yesterday's reports bolstered analysts' predictions of an improving industry outlook on fees, higher ticket prices, and jet fuel's retreat from record prices. JPMorgan Chase & Co.'s Jamie Baker said Wednesday that 2009 operating profits may be the best ever.

The airlines' forecasts "are on the high side of what anyone expected," said consultant Robert Mann of R.W. Mann & Co. in Port Washington, N.Y. "You have the possibility of a break-even or better fourth quarter. It could be an extremely good sign for 2009."

Capacity reductions at US airlines are kicking in starting this month, and the carriers are eliminating their lowest fares to help stem losses from a 43 percent surge in the price of jet fuel in the past year.

American, Delta, and Northwest rank first, third, and sixth in the United States by traffic, respectively, and their comments echoed yesterday's forecast by number two United Airlines. The biggest US carriers briefed analysts and investors at a Calyon Securities conference in New York.

"If you think about the 10 percent capacity reduction we have going forward, an unprecedented large capacity cut, you would certainly expect double-digit growth" in unit revenue for the industry, said Scott Kirby, US Airways Group Inc. president. "Even that might seem conservative."

American said its third-quarter unit-revenue gain will be in a range of 10 to 11 percent. Eagan, Minn.-based Northwest said its increase would be 9 to 11 percent on its US mainline and commuter routes. UAL Corp.'s United said it would have a unit-revenue jump of as much as 5.5 percent, including its regional partners.

Airlines' fees for checking bags and other optional services are "a line of revenue that just never existed before," said Stuart Klaskin of KKC Aviation Consulting in Coral Gables, Fla.