Air Traffic Shows Modest Improvement (AMR)(UAUA)(CAL)(DAL)

Faced with higher fuel prices and falling passenger traffic, the airline industry is ailing. There are concerns that some carriers will go bankrupt if the situation does not improve by the holiday season which usually is a heavy travel period.

The International Air Transport Association is seeing a tiny up-tick in travel trends.

The agency reported that international scheduled traffic results for July showing passenger demand declining 2.9% compared to a year ago. The July passenger demand fall of 2.9% was a relative improvement over the 7.2% drop in June and the 6.8% decline recorded over the first seven months of the year.

The news may not be much comfort to investors in US airline stocks. Any real recovery will have to involve substantial increases of passenger traffic over 2008, and that is not likely to happen while both consumers and businesses are spending as little as possible. Travel remains a luxury in most cases, something which can be deferred.

Shares in American (AMR) are down over 40% in the last year. The same holds true for United (UAUA). Delta (DAL) and Continental (CAL) have done better, but neither is up during the period.

The International Air Transport Association news may be a sign that a bad situation is not getting worse at the rate that it was earlier this year, but that is cold comfort for airline executives and investors.

Douglas A. McIntyre