Airline Travel Rebounds while Airfares Climb

The past decade for the airline industry has been a spiral into near oblivion.

ATA president and chief executive, James May, described it as “the lost decade,” as, first, fear of terror choked out travelers, then, fuel prices spiked coming into a global recession that left people pinching pennies and airlines gobbling up all profits from the previous decades just to stay afloat.

Now, the carriers appear to be finding their first warm embrace in summer 2010.

Southwest airlines reported a $112 million profit in the second quarter 2010, a 23 percent jump that surpassed forecasts.

Last week, Delta Air Lines posted its best second quarter since the advent of the lost decade. The carrier profited $467 million from the previous year’s loss of $257 million.

In fact, it is predicted that all U.S. airlines will end 2010 in the black, a surprising assessment given the losses in 2008 and 2009.

The factors bolstering the turnaround are simple supply and demand. When the economy was in its stupor people weren’t flying. The airlines were forced to ground more flights to cut costs. This resulted in a degrading feedback cycle. Now that the economy is making a run, more people are taking to the skies.

Business travelers lead the way as companies allotted more money for travel after the difficult recession. Then more and more leisure travelers came out for the summer travel season. All resulted in less planes being grounded and now airlines have the demand to fill capacity.

The result, now, is an increase in fares driven by the demand. US Airlines’ first-quarter-2010 fares rose 4.7 percent to a nine-year high.

Along with higher fares, summer travelers can expect greater crowds, delays and planes filled to the brim thanks to capacity discipline—all byproducts of the rebound.