Analysts foresee a positive trend for airline industry

Tis the season to travel and the airline industry, which could use the boost, is hoping people will take to the skies rather than drive or use other forms of transportation to get to their holiday destinations.

Tis the season to travel and the airline industry, which could use the boost, is hoping people will take to the skies rather than drive or use other forms of transportation to get to their holiday destinations. Those hopes may be answered this year.

According to one IBISWorld, people will be traveling in record numbers. In fact, in the report George Van Horn, a senior analyst with IBISWorld, said despite the high fuel costs, crowded planes, and unpredictable weather problems “more people will be flying this holiday season than in any previous year in aviation history.”

The report states the industry is “poised to begin producing real contributions to economic growth” and start a positive trend that is expected to reverse a five-year decline that was initiated in part by 9/11.

But the IBISWorld's report may be one of the only recent pieces of good news around the industry. Most of the news and reports paint a rather turbulent picture of the industry making the all important fourth quarter anything but a smooth flight in 2008. Tom Horton, CFO of American Airlines, recently said US airlines will be facing a difficult fourth quarter. “"The industry hasn't fixed itself. I think we're going to see a difficult fourth quarter for the U.S. airline industry given oil prices where they are," he said.

An article in USA Today this week reported that despite strong travel demand from consumers and business people the nation's top six airlines are continuing to cut their U.S. schedules. According to the article, American, United, Delta, Continental, Northwest, and US Airways have “scheduled 4.4% fewer seats for January than a year earlier.”

One of the common threads in numerous reports detailing the problems the airlines are encountering is the high fuel prices. The increasing prices have caused the airlines to raise fares thus making consumers less inclined to travel. This week Delta said high fuel prices were the reason it cut its operating margin forecast, which in turn caused its stock price to drop leading the sector lower. As a result Delta has scaled back its 2008 growth plans.

And they weren't the only ones. Bloomberg.com reported that United, Continental, and Southwest all cut 2008 capacity plans because of growing concerns about rising oil prices and a softening economy. Just like the rest of us, the airline industry has to wait and see what surprises the holiday season and new year has in store.

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