Reports from American Airlines and United Airlines show that air travel demand is growing modestly and there aren’t many empty seats, but average fares continue to decline.
New government figures show that while fares are coming down, airlines are keeping most of the savings from cheaper jet fuel.
The average domestic round-trip ticket in the third quarter was $372, down 6.2 per cent from a year earlier, according to the U.S. Department of Transportation. Separately, the department reported Tuesday that the price airlines paid for a gallon of fuel plunged 37 per cent, to $1.46, between December 2014 and December 2015.
Airline executives say fares are based on supply and demand, not the cost of fuel, and the latest reports indicate that travel demand is holding up well.
However, American Airlines Group Inc. said Tuesday that it continued to expect a key revenue measure to fall by 6 per cent to 8 per cent in the first quarter.
That mirrored a report late Monday from United Continental Holdings Inc., which saw the same drop in the revenue figure. United said lower average prices and a downturn in travel among people affected by the oil industry slump contributed to the drop in revenue for every seat flown one mile.
Investors pay close attention to that revenue figure, which falls when airlines sell fewer seats or cut average fares. The figure dropped throughout 2015, and Delta Air Lines Inc. said last week that it fell by 3 per cent in January, partly because the strong U.S. dollar hurt foreign sales.
Southwest expects first-quarter operating revenue per mile to be about flat with a year ago.
Southwest’s traffic jumped 11 per cent. Delta’s January traffic rose nearly 4 per cent, American saw a 1.6 per cent uptick, and United said passengers flew about the same number of miles as they did a year earlier. All four filled a higher percentage of seats than they did in January 2015.
In afternoon trading, shares of American were up 75 cents, or 2.1 per cent, to $$36.30; United was up 30 cents to $45.98; Delta rose 88 cents, or 2.2 per cent, to $41.65; and Southwest rose 49 cents to $35.21.