Airline outlook: Most see gains

DALLAS - Airline executives are mostly optimistic that higher fares will continue to boost revenue, but JetBlue Airways warned Wednesday that ticket sales for the holiday season could be weaker than expected and it lowered its outlook for the fourth quarter.

JetBlue shares dropped 4 percent, and other airline stocks fell by smaller percentages.

The U.S. airline industry is closing in on its first profitable year since 2007, thanks to higher fares. At Southwest Airlines Co., the amount that passengers pay per mile is up about 13 percent compared with last year. Chief financial officer Laura Wright said that was "pretty remarkable" considering that the nation was still struggling with 9.8 percent unemployment and that business travel has not fully recovered from the recession.

Wright and several other executives who spoke at an investor conference in New York were upbeat about travel demand continuing to improve next year, but they fretted about rising fuel prices. Crude oil surged above $90 a barrel this week, and fuel is a major expense for airlines.

The airlines have taken out insurance policies in the form of energy price-hedging contracts, but they would still suffer if fuel prices continued to rise. If oil hits $100 a barrel, "it's another big hole we've got to dig our way out of," Wright said.

JetBlue sounded the most alarming note Wednesday, as chief financial officer Ed Barnes said demand for holiday travel was not as strong as expected. The airline thought it would sell more high-priced last-minute tickets than it has.

JetBlue now believes revenue per available seat mile, a closely watched measurement in the airline business, will rise between 8 percent and 10 percent in the fourth quarter. That's down from an earlier forecast of 10 percent to 12 percent growth.

"We had planned on the peaks being slightly stronger than maybe what the peaks are turning out to be," Barnes said. Instead of holding out for high-fare travelers, JetBlue had to fill more seats with passengers at lower fares.

Other executives put a more positive spin on peak holiday sales. At Delta Air Lines Inc., chief financial officer Hank Halter said his company just concluded a good Thanksgiving period and did not see weakness in holiday sales ahead.

Bella Goren, chief financial officer of American Airlines' parent, AMR Corp., said advance bookings were as good as or better than at this time last year.

"We are also encouraged by the fare environment, with fewer sales and fare levels that are actually going up in some markets," especially on international routes, Goren added.

AMR said fourth-quarter passenger revenue per mile would be 7 percent higher than in the same period last year.