U.S. Air Passenger Growth Slows in Sluggish Economy

U.S. airline passenger numbers will reach 1 billion in 2023, two years later than projected, because of slow economic growth, the Federal Aviation Administration said.

The revision in the agency’s annual forecast follows an “unprecedented” drop in operations last year, when take-offs and landings fell 10.4 percent, said Nan Shellabarger, the agency’s director of aviation policy and plans.

“We’re faced with an economic scenario we haven’t seen in my time in the forecasting business,” Shellabarger told reporters in a briefing in Washington. “There is no rapid recovery in demand predicted.”

The revision marks the third consecutive year the FAA has pushed back the expected date for 1 billion passengers, a milepost that compares with 704 million for the fiscal year that ended in September and the lowest in five years.

The global airline industry will take at least three years to recover from a travel slump, the International Air Transport Association said last month.

Airlines are in a “tenuous recovery” and may earn a profit this year as revenue improves and business-travel picks up, US Airways Group Inc. President Scott Kirby said today at an FAA conference.

U.S. airlines lost $60 billion from 2001 to 2009, according to the Air Transport Association, a trade group for U.S. carriers including Delta Air Lines Inc., AMR Corp.’s American Airlines and Southwest Airlines Co.

The FAA conducts the annual forecast to help plan its long- term needs for staffing and equipment.

‘Sluggish’ Spending

Consumer spending and economic growth will be “sluggish,” with gross domestic product rising 1.5 percent in the fiscal year that began Oct. 1, the FAA said. The agency projected 2.4 percent GDP growth in the 2010 forecast issued last year.

The agency also forecast today that unemployment will remain high and oil prices will exceed 2009 levels in the near term.

Even with those pressures, the industry is “poised in a way it hasn’t been for a very long time” said Gary Chase, an analyst with Barclays Capital in New York.

U.S. carriers have slashed costs by parking 500 planes and eliminating more than 30,000 jobs over the past two years. The group should return to profitability as the business cycle improves, Chase said.

‘Competitive Dynamics’

More consolidation is needed, though it is hard to predict when that will occur, said Kirby of US Airways.

Continental Airlines Inc. Chief Executive Officer Jeff Smisek said today at a separate JP Morgan conference in New York that he is watching “competitive dynamics” in the industry and would consider merging with another carrier if “it’s in our bests interests to bulk up defensively.”

Continental and UAL Corp.’s United Airlines called off merger plans in April 2008, which Smisek said was the right move at the time. It would be “premature” to make a decision on consolidation right now, Smisek said today.

Take-offs and landings will fall 2.7 percent in the current fiscal year, the FAA projects. Domestic enplanements, or the number of passengers on planes, will rise 0.4 percent this year and 2.5 percent annually during the 20-year period, the agency said.

International enplanements will increase 0.9 percent this year and will reach an average of 4.1 percent for the remainder of the forecast period, the FAA said.

The FAA has pushed back its forecast for reaching 1 billion passengers several times in the past decade.

In 2001, six months before the Sept. 11 terrorist attacks, the FAA said the country would surpass 1 billion passengers by this year. In 2002, the FAA slid the projection to 2013. In 2008, the agency moved it to 2016 from 2015. Last year, the FAA moved the milepost to 2021 from 2016.