July 9, 2009 / 7:06 PM / 10 years ago

With demand on the rocks, U.S. airlines offer sales

CHICAGO (Reuters) - U.S. airlines, plagued by slumping business travel demand, may face lean bookings in the late summer and early fall, and some carriers hope fare sales will spur enough leisure travel demand to fill the gap, experts said on Thursday.

A sweeping fare sale by Southwest Airlines this week illustrates the need to generate bookings at the tail end of the busy summer travel season.

The low-cost carrier on Tuesday launched a 2-day sale that amounts to one of its biggest ever. Other carriers matched in some markets.

“With Southwest coming out with that unbelievable sale, and some airlines matching and some not, it clearly has to tell us that things are not looking good,” said Terry Trippler, at tripplersview.com, a travel opinion website.

He said the sale and its timing — for travel from September 9 to November 18 — reflect concerns that industry capacity cuts are not expected to keep pace with weakening demand.

“If we don’t see another sale in two weeks, then it did its job to generate enough traffic,” Trippler said. “I think it probably did.”

The airline industry has been hard hit by the economic recession that has eroded travel demand. Meanwhile, carriers must contend with extremely volatile fuel prices that make their operating expenses difficult to forecast.

Airlines slashed their capacity late last year and continue to do so in 2009. Last month, Delta Air Lines and AMR Corp’s American Airlines announced new cuts that take effect later this year. Other carriers are expected to follow.

Until the new round of downsizing occurs, airlines are likely to launch sales to bolster demand and fill planes, said airline consultant Michael Boyd.

“There is a free fall in demand,” Boyd said. “I think the sales are just to fill up the gap between now and roughly October or November.”

He predicted that by December the U.S. airline industry will have cut capacity by 12 percent year over year.

Airlines typically do not provide detailed bookings outlooks, but some executives have complained recently of weakness in business travel this year.

US Airways Chief Executive Doug Parker told Reuters in an interview on Wednesday that he sees some modest signs of recovery in business travel demand, but that it is too soon to call it a recovery.

Reporting by Kyle Peterson; Editing by Richard Chang

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