December 15, 2009
For the travel industry, 2009 is a year best forgotten, or as the chairman of Southwest Airlines, Gary C. Kelly, put it in a message to customers, it was “an annus horribilis.”
And the prospects for 2010? This is typically when the industry issues its forecasts for the year ahead, and those forecasts are often shaded with optimism about better times ahead. But this time, many travel executives and analysts are declining to make rosy predictions. Instead, they are offering a forecast that goes like this: Although some indicators show that travel has stabilized, with tentative signs of improvement in airline bookings and hotel reservations, this trend could falter if fuel prices increase or the fragile economic recovery takes a turn for the worse.
Because of the weak spots in the economy, Mr. Kelly notably contradicted some of his colleagues’ predictions about an increase in business travel at a recent airline investor conference.
“What we stated was we are not planning for a big return of business travel next year,” said Laura Wright, Southwest’s chief financial officer and senior vice president for finance. “To put that in context: we don’t know. We don’t have a long-term view of the booking curve.”
Southwest and other airlines have seen encouraging signs in recent months. Southwest carried nearly 8 percent more revenue passengers in November than in the same month last year, and Virgin America recently reported its first quarterly operating profit, earning $5.1 million in the third quarter. But comparisons with late 2008 can be misleading because of the steep drop in business travel that occurred a year ago as the financial crisis deepened.
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“As we all know, the messages are really mixed on the economy, and employment numbers are still bad,” Ms. Wright said. “We’re assuming business travel is not just going to rebound next year. If it does come on stronger than we expected, we’ll be thrilled.”
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