US carrier yields falling off a cliff
US domestic yields plunged 14% in Mar-2009, according to the Air Transport Association. It was the fifth worst monthly fall in yields this decade, behind the 17.5% fall in Oct-2001 in the immediate aftermath of September-11, a 15.8% fall in Sep-2001, a 14.8% reduction in Nov-2001 and a 14.7% fall in Jan-2002.
But the 14.4% reduction in yield last month on the Atlantic route was the worst this decade – outstripping even the deep falls around September-11.
Pacific yields fell 4.5% last month and are now regularly outperforming yields on the Atlantic for US carriers.
Latin American yields slumped 10.4% in Mar-2009 year-on-year.
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ATA passenger yield growth: Jan-08 to Mar-09
Southwest sees “toughest revenue environment in our history” – no bottom in sight
The massive reductions in yield are attributed to the weak US economy and corresponding deep reductions in corporate travel. The falls come despite aggressive cuts to capacity by virtually all US carriers.
Earnings are suffering as a result. Southwest Airlines CEO, Gary Kelly, described the US economic conditions as “brutal”, with the carrier facing the “toughest revenue environment in our history”. He stated, “I’m certainly not ready to call the bottom yet” of the downturn. He added that May traffic data “should tell us a lot”, but based on the experience of previous downturns, an increase in business travel would not occur “for quite some time”.
The CEO of the formerly bullet-proof Southwest warned, “we'll have to consider all available means to restore our profitability, or else we'll be bankrupt like so many other airlines have been”.