Domestic Air Travel: Lowest Since Post-9/11

From the just-released BTS November air traffic data, this graph of year-over-year monthly changes in domestic air passenger revenue-miles is fairly eye-opening. The industry is in its worst downturn since 9/11, with domestic RPM off 14.3% in November alone.

Mind you, that does help explain why on-time arrival has been so good of late.

Comments

[Stone Fox C...:]

Thanks for the chart but this isn't that surprising. Just reminds me of why you never invest in a airline. Wonder if the rebound will be like after 9/11.

Feb 12 04:50 PM

[Jake Berzon:]

The passenger revenue miles response to 9/11 looks typical of a short impulse response, while the current decline looks much more like a step function response. (Reasonably assuming that passenger revenue miles can be modeled as a function of the derivative of GDP over time.)

Or more simply, don't expect domestic air passenger revenue-miles to recover any time soon.

Feb 12 05:29 PM

[Crocodilian:]

On Feb 12 05:29 PM Jake Berzon wrote:

> The passenger revenue miles response to 9/11 looks typical of a short
> impulse response, while the current decline looks much more like
> a step function response. (Reasonably assuming that passenger revenue
> miles can be modeled as a function of the derivative of GDP over
> time.)

Gotta love a man who reads charts with an electrical engineer's eye.

Leave aside, for one moment, that the airline business is an existentially awful business, leave aside the mammoth reliance on the financial strength of now not-so-strong financing shops (eg GE) and you're left with a commodity.

This commodity will remain in some demand, and the question will remain: "Who can provide the commodity efficiently?" The answer in dining is "McDonalds" and the answer in travel is "Southwest" (though their fuel hedges will hurt them until they roll off).

The chart is nightmarish for those who are leveraged plays on the _growth_ in airline demand-- engine and airframe manufacturers and financers.

Feb 12 09:22 PM

[HomeGamer:]

November is now (mid-Feb) three months behind us.
The November chart is a rear-view-mirror snapshot, but with two important differences to the present:

1. Airlines in November were still operating at higher capacity, ie more aircraft still flying. Many additional aircraft have been permanently grounded in the three months since, notably January. Bad numbers like November's confirm that those grounded aircraft (and those scheduled to be grounded during 2009) will not be leaving their long term storage in the desert in the foreseeable future.

2. November was an unprecedented month of financial uncertainty verging on Y2k-like mass panic, with Paulson and Bernanke on every tv screen telling Congress that global apocalypse was hours away. 1929, no cash in the ATMs tomorrow, back to the ice age. Now, we're in a major, maybe unprecedentedly deep recession, but 1929 is not an immediate prospect.

That said, the industry is still a commodity business model, badly led by indifferent CEOs who seem never to learn from the industry's mistakes, poorly run by the caliber of front line employees that can be expected for the $11/hour that the CEOs have decreed. That's unlikely to change.

In a rational world, air travel would be nationalized and regulated for the common good just like any other essential utility--Amtrak, mail delivery, potable tap water, electricity and basic phone service. That likely will come only once the industry is at the point of total collapse.

Until then, the airlines are enormously profitable trades as the majors swing 40 and 50% in their trading ranges. Buy the two-week deep dips, sell the one to three day surges of enthusiasm.

And yes, it's Death Valley Days for those who manufacture and finance airline big-iron.

Feb 13 11:08 AM

[Crocodilian:]

On Feb 13 11:08 AM User 198978 wrote:
> In a rational world, air travel would be nationalized and regulated
> for the common good just like any other essential utility--Amtrak,
> mail delivery, potable tap water, electricity and basic phone service.
> That likely will come only once the industry is at the point of total
> collapse.

Oh dear god, you don't really mean that, do you?

Like Amtrak?

Nationalized transportation services are nightmares. The only adequate air carriers are the ones with no connection to the old regulated models . . . Southwest, Airtran, JetBlue, Ryan Air -- these are high efficiency providers of air transport service, that suck up no taxpayer dollars, and allocate resources based on economic logic.

Nationalize airline travel and you'd get . . . Alitalia

There's every reason for air transport to remain a private endeavor, perhaps with subsidies or fees to encourage/discourage certain routes of national importance, but that's it.

Feb 13 06:31 PM

[James Shaw:]

Airline sector will be recovering soon as lower fuel prices, tight cost control will give them much needed profit in coming quarters even with lower revenue.

Now they can hedge for lower fuel prices long term and the huge hedge loss will be the past.

It is a great time to buy major airline stocks.

Feb 14 02:40 AM

[The JonLer:]

Where to start..

I am a huge fan of aviation and free market capitalism. In fact, I think air travel emboldens all freedom stands for.

That said, hedgefunds control the trade in airline stocks which is beyond criminal. UAUA trades with a market cap of $780 million with $20 billion of revs and $3 forecasted in earnings for 2009. Even if they only breakeven, the company should be worth at least cash on hand which is $3 billion. It is ubelievable that with capacity cuts and a $110/bbl drop in oil these securities are trading below where they were when oil hit $100/bbl for the first time last January.

I own a huge stake in UAUA and AMR; I have been hammered the last 20 days or so as the stocks are manipulated by some computer quant model everyday. In 19 out of 20 days these stocks have made lower highs and lows. Unbelievable.

Since Obama took oath AMR has dropped 68% and UAUA 55%. Maybe nationalization is coming. Just take a look at the banks for Christ sake!

Feb 20 02:24 AM