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As Network Airlines Report High Load Factors, Continental Moves Up
By David Bond
August 10, 2003
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Traffic on a Treadmill
Don't look now, but Continental Airlines carried more passenger traffic
in July 2003 than it did in July 2001--before the September 2001
terrorist attacks--and is close to passing Northwest to become the
fourth-largest airline in the U.S.
Continental's data highlight July traffic reports showing that the six
big U.S. hub-and-spoke airlines flew chock-full airplanes as the summer
season got underway in earnest. Load factors were between 81% and 83.7%,
some of them setting company records. But only Continental accomplished
this while offering more capacity than it flew a year earlier, and none
of the six carriers will turn in the profits that 80-plus load factors
would have generated before the current industry downturn, now in its
third year.
Percentage changes in traffic and capacity, and percentage-point changes
in load factor, are shown in the accompanying table. The changes from
July 2002 to July 2003 are shown as each airline reported them. But July
2002 operations were dramatically lower than those of July 2001 because
of the terrorist attacks, so two-year changes are tabulated as well.
Data from Southwest Airlines are added to illustrate how the
still-growing, low-cost point-to-point airlines differ from the
so-called "legacy" carriers.
If Continental can maintain July's momentum through the summer--a big
if--the carrier stands a good chance of improving on its second-quarter
2003 operating profit--$76 million after special items, $238 million in
all. Its load factor was 83.5% in July, but its mainline load factor was
84.5% and its domestic mainline load factor was 85.7%, both company
records.
Equally important was Continental's revenue news. The company estimated
that its mainline passenger revenue per available seat mile increased
4-6% over that of July 2002. On a consolidated basis--mainline plus
regional operations--Continental estimated that it would be able to
break even in July with a 77% load factor, versus the 83.5% it achieved,
and that the break-even load factor for August will be 76%.
Whether size is measured in traffic or capacity, Continental is creeping
up on Northwest. Its July traffic was within 1.5% of Northwest's last
month, compared with 13.1% in July 2002 and 13.4% in July 2001. In
capacity, Continental was shy by 1.3% last month, 11% in July 2002 and
10.5% in July 2002.
A similar change may be developing between Delta Air Lines, currently
No.3 in the U.S., and United Airlines, No. 2. United, in Chapter 11
bankruptcy protection, is doing what US Airways did in Chapter 11 last
fall and winter--trying to shrink its way into the black. US Airways'
capacity and traffic are down 25.8% and 21.2%, respectively, during the
past two years. United's two-year decreases are 23.7% and 17.3%,
respectively. By contrast, Delta is one of three carriers, with American
and Northwest, with reductions in the 9-15% range.
The bottom line is that Delta was within 4.7% of United in traffic and
4.3% in capacity last month, compared with 13.3% and 9.9%, respectively,
two years ago.
At 77.5%, Southwest had the lowest July load factor among the seven
biggest U.S. airlines. But it breaks even in the 50s and is virtually
certain to remain the most profitable among them.
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