North American airlines are unlikely to hike fares in the near future despite the latest batch of quarterly results showing demand is picking up after one of the worst years in aviation history, analysts aid.
US Airways is the latest of the North American carriers reporting better–than-expected fourth-quarter results. The company said today that its fourth-quarter net loss amounted to $79 million, much improved from a loss of $543 million a year earlier.
JetBlue Airways, AMR Corp., Continental Airways, Southwest Airlines and United Airlines have all beat analysts’ expectations in the latest earnings round this week as passenger demand improved and the airlines took steps to cut costs and capacity.
“It’s early days and still a long way from where it could be, but we’re seeing improved demand in both Canada and the U.S.,” Genuity Capital Markets aviation analyst David Tyerman said. “The second step that needs to happen for the airlines is for pricing to improve.”
That may not happen any time soon. U.S. carriers were this week forced to pull plans for a $16 rise in domestic fares announced just last week.
AMR Corp’s American Airlines was the first to announce the increase, followed by rivals such as Delta and Continental. They backed away from the decision after some other airlines got cold feet on concern about losing passengers.
In the short term, airlines may even be tempted to continue discounting to encourage consumers still watching their budgets after the worst recession in living memory to shell out on airfares.
Instead, in an attempt to boost revenue, airlines are introducing extra charges such as baggage fees and they are likely to stay, Tyerman said.
Airlines are struggling to recover after a year that saw the biggest ever post-war drop in air passenger demand, according to the International Air Transport Association’s latest report, released this week.
IATA is predicting another tough year, with a further $5.6 billion in lost revenue for 2010.
Still, analysts say the latest results show the industry may at least be moving in the right direction.
Another sign confidence is beginning to return was Air Canada’s announcement Wednesday that it’s adding seven new U.S. routes in coming months.
It will start with flights from Toronto to Orange County, California in April.
