20 May, 2011

US airlines say demand up, see more capacity cuts


A Delta plane sits on a runway prior to takeoff at John F Kennedy International Airport in New York December 25, 2009. REUTERS/Lucas Jackson

U.S. airlines said on Thursday that bookings were strong heading into summer, but higher fuel prices were pressuring profits and Delta Air Lines said it would cut capacity further in response.

Delta, the second-biggest U.S. carrier behind United Continental Holdings, also said it would reduce maintenance and other non-fuel-related costs.

Demand for air travel is picking up after years of weakness, but the picture is clouded by an uncertain U.S. economic recovery. Weak data on U.S. home sales and factory activity on Thursday showed an economy stuck in slow-growth mode.

Oil prices that have risen 40 per cent from a year ago are raising airlines' costs and cutting into profits. In response, the carriers are steadily raising fares, dumping less fuel-efficient planes and looking for ways to save money.

Delta said 55,000 of its employees were eligible for a voluntary exit program it announced this month in a bid to cut costs.