US: Airlines review capacity plans as average fares drop
US airlines are starting to review their capacity plans in the wake of a continuing drop in average fares, with the decline in ticket prices outpacing the slide in fuel costs. A number of carriers reported declines in their closely watched average passenger revenues in February, and most expected the metric to remain negative at least through the first half of the year, triggering another slide in share prices. Investors are increasingly concerned low fuel prices are driving some carriers to drop the capacity discipline and pricing power that helped the industry generate a record profit of almost $19b last year. The industry’s need to balance complex issues of low fuel prices, rising capacity and increased competition comes as United Continental Holdings is facing pressure from some shareholders to revamp its strategy. Fare wars have sprung up in the past year in a number of markets, notably Dallas and Chicago, as low-cost airlines added more flights and network carriers, such as American Airlines, matched ticket prices to defend their market share and the profitability of their big hubs. Airline executives insist their business models have evolved to sustain profitability, without the boom-and-bust that has seen carriers add capacity when demand is buoyant, only to slide into losses when it cools.<br/>
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US: Airlines review capacity plans as average fares drop
US airlines are starting to review their capacity plans in the wake of a continuing drop in average fares, with the decline in ticket prices outpacing the slide in fuel costs. A number of carriers reported declines in their closely watched average passenger revenues in February, and most expected the metric to remain negative at least through the first half of the year, triggering another slide in share prices. Investors are increasingly concerned low fuel prices are driving some carriers to drop the capacity discipline and pricing power that helped the industry generate a record profit of almost $19b last year. The industry’s need to balance complex issues of low fuel prices, rising capacity and increased competition comes as United Continental Holdings is facing pressure from some shareholders to revamp its strategy. Fare wars have sprung up in the past year in a number of markets, notably Dallas and Chicago, as low-cost airlines added more flights and network carriers, such as American Airlines, matched ticket prices to defend their market share and the profitability of their big hubs. Airline executives insist their business models have evolved to sustain profitability, without the boom-and-bust that has seen carriers add capacity when demand is buoyant, only to slide into losses when it cools.<br/>
