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Marked improvement in US domestic yields in November reflects improving economy

The US Air Transport Association reports domestic US yields fell just 4.6% in Nov-2009 – the first single digit decline since Feb-2009 and a marked improvement from the 12.5% fall in Oct-2009. The improving trend reflects rising Business travel demand as the US economy picks up.

Overnight, The Conference Board reported the US Leading Economic Index (which rose 0.9% in Nov-2009) has been on an “uptrend for more than half a year”, with improving financial conditions, labour market indicators and housing permits pushing recent gains. On balance, the indicators point to a “bright new year”, with The Conference Board adding, “we can expect a slowly improving economy through 2010".

This is good news for airlines, which have suffered from a weak pricing environment for more than a year. Domestic yields were down as much as 18.9% year-on-year in Jun-2009.

International yields have also improved, but remain at fairly depressed levels. Atlantic yields were still down 8.2% last month (but much improved from the 25.2% reduction in Jun-2009), while Pacific yields were down 14.9% - around half the massive 27.5% fall in Jul-2009. Latin American yields were down 11.5% year-on-year last month, against a 21.8% fall in Jun-2009.

ATA yield growth: Jan-2008 to Nov-2009

On a 12-month rolling average, yields are showing signs of bottoming, but the depth of the falls will take a long time to recover.

ATA yield: 12 months moving average