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US airlines expected to contend with sluggish yield growth for years to come

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US airlines are being lauded for a disciplined approach to capacity that has contributed to an upswing in yields, but the good times aren't expected to keep rolling, at least not at the same level of growth.

Carriers should expect a difficult yield environment for the foreseeable future, FAA warned at its Aviation Forecast Conference last week.

FAA said that "reduced capacity combined with a modest recovery in passenger demand provided pricing power for [US] carriers during 2011," with nominal yield increasing 4.6% compared to 2010. It projected another 3.1% increase in nominal yield this year.

But over the medium term (next five years), FAA said airlines can expect little more than "relative stability" in yields and, through 2032, it forecasted that US airlines' nominal yield will rise just 1.2% on average per year.

This was received by airlines as good news, by the way. That prompted Airlines for America (A4A) chief economist John Heimlich to quip, "It's hard to think of another industry that would say, 'We'll have flat pricing over the next five years,' and then throw a party about it."

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