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, an indicator of traffic and fares, will exceed the projection it gave just last month. Southwest Chief Executive Gary Kelly told employees Monday that 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. An Air farewatchdog.com 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.
Delta Air Lines, the third-biggest U.S. carrier behind American and United Continental Holdings Inc., reported June 3 that Prasm, an industry benchmark for traffic and fares, rose 7 percent in May as load factor rose 1.7 points to 86.5 percent. United hasn’t reported May results.
Gains in the job market and wage growth may give some consumers the confidence this summer to book air travel and vacations they’ve deferred in the past. Employment in the U.S. reached a milestone last month as payrolls pushed past their prerecession peak, while fewer firings also are helping put more Americans at ease about spending.
The Bloomberg U.S. Airlines Index rose 41 percent this year through June 6, and 78 percent in 2013. That compares with a 5.5 percent gain year-to-date for the Standard & Poor’s 500 index and 30 percent increase last year.
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.