US carriers tweak trans-Atlantic strategies

US carriers led by United Continental Holdings Inc. are shielding their lucrative trans-Atlantic business from the worst of Europe’s economic slump, after shrinking the supply of seats to support higher fares. Summer ticket prices to western Europe have risen an average of 3 per cent from 2011, according to Travelocity.com. Demand for US-to-Europe trips also is holding up, with ticket sales climbing 5.9 per cent to 1.31 million for the peak travel months, according to Airlines Reporting Corp. Flights across the Atlantic are the biggest overseas market for US airlines, with traffic that can roughly double in US summer months from wintertime lows, data compiled by Bloomberg show. Cutting capacity helps carriers maintain pricing power, especially with European business travel at risk from the region’s economic slowdown. “The industry is being proactive about restructuring the amount of seats that are available for sale given the European debt crisis,” Dan McKenzie, an analyst at Rodman & Renshaw in New York, said. Delta Air Lines Inc., after paring capacity, filled 84.6 per cent of seats on trans-Atlantic flights in May, up 0.9 percentage point from a year earlier, even as traffic fell. “All indications are that Europe is holding up well,” David Fintzen, an analyst at Barclays Capital in New York, said. “You’ve seen underlying demand trends get a little bit stronger over the last couple of months.” Ticket volume That pattern shows up in the information from Airlines Reporting Corp., which clears transactions for flights booked on US airlines. That gives the company a look at future bookings instead of the backward snapshot provided by carriers. While the number of tickets sold for each of the three summer months increased, the data also show challenges as airlines grapple with slowing economic growth. Fares for both June and July bookings declined before an August increase, data showed. Flights from the US to western Europe are averaging $1,315 (Dh4,830) for May through September, up about 3 per cent from the same period in 2011, Travelocity data show. Industry consolidation Ticket prices, pressured by competition in the past, are benefiting from industry consolidation and a growing number of global marketing alliances, Courtney Scott, editor at Travelocity, said. Delta bought Northwest Airlines in October 2008 and was the world’s largest carrier until United Airlines combined with Continental Airlines Inc. to form United Continental in 2010. Southwest Airlines Co., the biggest US discount carrier, acquired AirTran Holdings Inc. in May 2011. “We’re seeing a higher increase in airfares because of these mergers,” Scott said. “The prices are just going to just keep going up.” Jet fuel prices dropped 7 per cent to $3.03 a gallon in May, paring a first-quarter surge, without relaxing availability of seats overall. The drop, which means lower costs for airlines, has helped spur gains in their shares.