Dec 10, 2009
NEW YORK (MarketWatch) -- Airline stocks
edged higher Thursday, following the broader market into the black as the price of oil failed in its bid to end its losing streak.
The advance came as one analyst downplayed earlier talk from airline executives that business-travel trends were improving, warning that recovery after more than a year of steep demand erosion would be difficult.
The NYSE Arca Airline Index (XAL 31.14, +0.17, +0.55%) tacked on less than 1% to close at 31.14 points, with six of its 13 components trading up. In the last 52 weeks, the sector benchmark has moved in a range of 31.50 to 12.62 points.
Crude oil closed down slightly at $70.52 a barrel, after climbing as high as $71.29 earlier. The contract has tumbled 10% in the past six days to end Wednesday at the lowest level in two months. See full story.
Leading the way skyward was United parent UAL Corp. (UAUA 10.20, +0.03, +0.30%) , and Continental Airlines Inc. (CAL 16.17, -0.07, -0.43%) both of which gained almost 2%.
Brazilian carriers Tam S.A. (TAM 20.27, +0.48, +2.43%) and Lan Airlines S.A.(LFL 16.36, +0.42, +2.64%) also moved higher.
Declining were shares of Alaska Air Group (ALK 32.45, +0.01, +0.02%) , SkyWest Inc. (SKYW 16.35, +0.00, +0.02%) and Ireland's Ryanair Holdings PLC (RYAA.Y 24.97, -0.16, -0.64%) .
A day earlier, legacy-carrier executives from Delta Air Lines Inc. (DAL 9.84, -0.04, -0.39%) to US Airways Group (LCC 4.36, -0.01, -0.23%) said they are seeing early signs that premium-paying business travelers are taking to the skies again. (They did caution that growth would be slow.)
The market was little impressed, though, and the Arca Airline Index closed down a fraction. "The market knows corporate [travel] is improving, but what it needed was color on how corporate-travel budgets and airline contracts were filling out," said Roger King on Thursday, a bond analyst with CreditSights.
Airlines are in negotiation with their corporate customers over next year's terms, but executives didn't comment on the talks.
"Management knows what corporate travel will look like for next year; they have hundred and thousands of these contracts under negotiation, and we get no color," King added of Wednesday's presentations.
The talk of a slow recovery in 2010 may translate into barely any recovery at all, the analyst commented With unit revenue down sharply for the year, it would need to climb at least 25% next year to get back to even, and that could be a Herculean feat. "Whatever recovery will be, it better be a lot, because revenue dropped a lot last year because of lower fares and lower volume," King said. "Fares are going to have to go up a lot to cover the less volume."
During the US Airways presentation, its president, Scott Kirby, noted that industry revenues fell to 0.55% of the nation's gross domestic product from a post-9/11 norm of 0.62% to 0.66%.
"So industry [unit revenue] year to date has declined an incredible 15%," he said. "This is remarkable to me. ... The worst year in the industry history in terms of passenger revenue decline is after 9/11, and it was about 12.5%."
Air travel certainly appears to be t least bouncing along the bottom. For September, the latest month for available data, air-traffic demand grew for the first time in 17 months, with the number of people traveling up nearly 1% from a year ago to 54.7 million, the U.S. Transportation Department.
U.S. airlines carried 1.2% more domestic passengers for the month, while the number of international passengers fell 1.7%.
For the first nine months of this year, the number of people flying fell nearly 7%, or 38.8 million, to 533.3 million -- the lowest January-to-September total since 2004, the government agency said.
Off to Asia
Separately, United Airlines and its parent UAL said it was pursuing a joint venture with Continental and All Nippon Airways for transpacific flights.
The carriers already have some code-share agreements through the Star Alliance, but a new agreement would allow closer coordination.
Such an agreement would help offset a similar move by American parent AMR Corp. (AMR 7.01, -0.03, -0.43%) , which is seeking closer ties with its alliance partner Japan Airlines (JALS.Y 5.59, -0.25, -4.28%).
Delta is trying to pry JAL away from AMR through a funding offer.