Traffic Jam Over the Atlantic

When country singer Alan Jackson recorded Too Much of a Good Thing Is a Good Thing, the airline industry might have been listening a little too closely.

This summer, U.S. carriers are pouring capacity into the trans-Atlantic market, hoping to continue last year's successes.

Last week, US Airways (LCC Quote) became the latest to announce trans-Atlantic growth, saying it will fly to Lisbon, Milan and Stockholm from Philadelphia. Days earlier, Delta Air Lines (DALRQ Quote), seeking to become the world's largest trans-Atlantic carrier, said it plans service from Atlanta to Dakar and Johannesburg.

In the first three quarters of 2005, the six major U.S. carriers increased their capacity across the Atlantic by 7.9%, resulting in a 15.5% revenue increase to $9.6 billion, according to Eclat Consulting of Reston, Va.

Continental Airlines (CAL Quote) boosted trans-Atlantic capacity by 16.8%, followed by Northwest Airlines (NWACQ Quote) with a 12.4% increase.

Continental showed the highest revenue increase, 26.6%, while Northwest reported a 17.2% jump. AMR's (AMR Quote) American Airlines saw revenue rise 16.1%.

"The legacy carriers put more capacity in international markets, driven by the revenue performance, which was quite good," said Gary Harig, Eclat's senior vice president. "Clearly, the domestic environment was more difficult. But they have to be cautious if it continues to increase."

Faring Well

Probably it's too early to say how this year's capacity increases will affect pricing. Last year's rise didn't hurt yields, said Jon Ash, president of Washington-based InterVistas-ga2. This year, Ash estimates, capacity could rise another 5% to 7%.

"Whether there's enough traffic remains to be seen," he said. "The seats will get filled, but perhaps at lower fares."

British Airways (BAB Quote), the biggest trans-Atlantic carrier at the moment, with 100 daily flights, is watching the capacity increases.

"The market in terms of volume remains strong, and yield remains under pressure," said Robin Hayes, British Airways' executive vice president for North America. "But we had a strong summer last year, and I don't expect a decline this year."

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