FAA forecasts 'modest' traffic recovery; Barclays, US Airways predict profits

With economic growth "sluggish" over the next couple of years, "there is no rapid recovery" ahead for the US airline industry, FAA Office of Aviation Policy and Plans-Forecast and Statistics Manager Roger Schaufele said yesterday.

FAA, which released its latest Aerospace Forecast covering the next 20 years at its Aviation Forecast Conference in Washington, remained relatively optimistic long-term but did downgrade projected airline industry growth from last year's prediction. It said total mainline US air carrier and regional enplanements will increase at an annual average rate of 2.6% over the next two decades, down from 2.9% forecast last year. Enplanements will rise 0.5% this year followed by "fairly modest increases averaging 3% [per year] from 2011-15," Schaufele said.

Passengers carried will climb from 704 million in 2009 to 1.21 billion in 2030, the agency stated, predicting that the 1 billion annual passengers-emplaned mark will arrive in 2023. Demonstrating the severe impact of the economic downturn, then-FAA Administrator Marion Blakey said just three years ago at the 2007 Forecast Conference that US "commercial aviation is on track to reach a billion passengers by 2015" (ATWOnline, March 16, 2007). US Air Transport Assn. President and CEO James May pointed out that FAA forecast in 2000 that 1 billion annual passengers would be reached by 2010.

US Airways President Scott Kirby, speaking at the conference, said 2008 and 2009 were "the two most traumatic years in the history of the industry," capping off a tumultuous decade. But since airlines "radically restructured with capacity decreases. . .if we keep oil prices under control, it looks like for the first time in a long time the industry could earn a profit [for full-year 2010]." He cautioned, however, that "it's a tenuous recovery and any change in oil prices or the economy could tip [earnings] the other way."

Barclays MD Gary Chase told the conference he is "very optimistic" about the next couple years, predicting "a classic up cycle with lots of profits" for US airlines. He explained that the industry's capacity cuts have driven "those passengers who value the system least out. . .Getting those marginal seats out of the system" will enable airlines to return to the black.

FAA forecast that US system ASMs, which declined 7.4% last year, will drop another 1.6% in 2010 before growing at an average annual rate of 3.6% through 2030. "Airlines have seen the light" regarding capacity, Schaufele said. "Going forward, airlines will be much more judicious on adding capacity than what we saw in the past."

The agency stated that whether US carriers return to profitability "will hinge on the return of demand for corporate air travel, the ability to pass on fare increases to leisure travelers and a stable environment for fuel prices."