Business&News: 11/12 Traveler's Check

Traveler's Check - BusinessWeek

About That Airline Capacity Discipline...

October 23, 2010 at 3:35 AM

This week airlines wowed Wall Street with robust profits built on rebounding business travel and the industry's restraint about restoring flights. "We will not grow for growth's sake," Jeff Smisek, chief executive of the world's largest airline, United Continental Holdings, told analysts on Oct. 21. Variations on the "it's-different-this-time" theme have been part of the industry's talking points for some time - investors may even consider airline stocks to be slightly less toxic these days.

But long-time airline analyst Michael Derchin at CRT Capital Group finds cause for concern: That much-touted discipline could already be crumbling. Capacity discipline is a matter of balancing supply with demand while trying to charge as much as possible for seats but also ensuring that not too many of them fly empty. It's a tricky game. The commercial U.S. mainline fleet remains nearly 400 airplanes below the level of September 2007, right before the economy's tumble, according to Ascend, a London-based firm that tracks aerospace data. That's because carriers still have plenty of airplanes parked in desert storage (and shifted some flying to regional partners) to curb supply.

"The bad news is we are seeing some erosion as evidenced by system capacity projected to increase 4.7% in 4Q10 and 4.3% in 1Q11," Derchin wrote today in a client note titled "Capacity Discipline - is It Beginning to Erode?" This follows modest growth of 0.4 and 2.7 percent in the past two quarters. For all of 2011, Derchin projects airline capacity growth of 2.7 percent, 1 percent higher than his previous prediction. Some airlines say they will tie their expansion to U.S. GDP growth - but in the heat of a recovery the question is whether that discipline holds. Like Lucy and the football, is this time different?

Air Travel Insights From Pilots

October 22, 2010 at 6:34 AM

There are certain maxims of air travel: severe turbulence is much more dangerous for humans than for aircraft; engine failures are manageable; and clear weather at your departure city or destination doesn't always influence whether a flight experiences weather delays. In this vein, Reader's Digest queried pilots for occupational tidbits the public may not know for its November issue. Note: The tired "50 Secrets Your Pilot Won't Tell You" headline construction is magazine-tease for "please buy/click this" and they - er, we - are all guilty of it. There are no "secrets" in aviation. The magazine also has a few comments from flight attendants. I've plucked a few of the choicer items.

"People always ask, 'What's the scariest thing that's ever happened to you?' I tell them it was a van ride from the Los Angeles airport to the hotel, and I'm not kidding."
- Jack Stephan, US Airways captain

"Most people get sick after traveling not because of what they breathe but because of what they touch. Always assume that the tray table and the button to push the seat back have not been wiped down, though we do wipe down the lavatory."
- Patrick Smith, commercial pilot, Boston

"Most of the time, how you land is a good indicator of a pilot's skill. So if you want to say something nice to a pilot as you're getting off the plane, say 'Nice landing.' We do appreciate that."
- Joe D'Eon

"It's one thing if the pilot puts the seat belt sign on for the passengers. But if he tells the flight attendants to sit down, you'd better listen. That means there's some serious turbulence ahead."
- John Greaves, attorney and former airline captain, Los Angeles

"Here's the truth about airline jobs: You don't have as much time off as your neighbors think you have, you don't make as much money as your relatives think you make, and you don't have as many girlfriends as your wife thinks you have. Still, I can't believe they pay me to do this."
- commercial pilot, Charlotte, N.C.