Airlines’ Unit Revenue Declines

A key measure of airline industry revenue declined slightly in November, reflecting weakness in ticket pricing even during a period of strong traffic, analysts said Tuesday.

Systemwide unit revenue, also known as revenue per available seat mile, declined 1.2% in November from a year earlier, according to Wall Street analysts who receive the data from the Air Transport Assn., an industry trade group.

The unit revenue slip occurred as capacity, or available seat miles, rose 5.1% during the month.

“Although these latest statistics were not unexpected, they demonstrate the continued weakness in airline pricing despite strong traffic,” wrote Ray Neidl, airlines analyst at Calyon Securities, in a research note.

“This dynamic, plus the industry’s entering the slow winter season and the continued uncertain oil price environment, continues to make us cautious on the airline sector, and thus we remain neutral on the airline industry,” he added.

This month, Continental Airlines Inc. estimated that its mainline unit revenue in November ranged from flat to up 1%.

Analysts use unit revenue figures from Continental, normally the only carrier that releases estimates at the start of the month, to predict unit revenue performance across the industry.

In recent months, however, Continental’s unit revenue figures have come in stronger than the rest of the industry’s.

Domestic mainline revenue declined 1.2% in November, while international mainline revenue posted a small decline of 0.3%, analysts said.

“We think the airlines remain washed out due to mixed signals about the economy and stubbornly high fuel prices,” wrote Susan Donofrio, an analyst for investment firm Fulcrum Global Partners, in a research note.

Many airlines have blamed high oil prices as a leading contributor to weakness in the industry this year. Airlines also have been hit by competition from low-cost carriers.