Traffic Jumps at Southwest, JetBlue

The low-cost carriers report double-digit increases in October, a sign of strong passenger demand.
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Low-cost carriers

JetBlue Airways

(JBLU) - Get Report

and

Southwest Airlines

(LUV) - Get Report

on Thursday reported double-digit increases in traffic in October, a sign of strong passenger demand, although JetBlue filled fewer of its available seats than it did a year ago.

Dallas-based Southwest said traffic, a barometer of demand expressed in revenue passenger miles, increased 13.5% last month from October 2003. That outpaced an 8.4% year-over-year increase in capacity, measured by available seat miles, allowing Southwest to fill 66.6% of its seats, an increase of 3.0 percentage points from a year earlier.

JetBlue, based in New York, reported a much bigger October traffic increase of 33.7%, while capacity grew 37.6%. The company's load factor, or percentage of seats filled was 83.1%, down from 85.5% in October 2003.

JetBlue shares were down 30 cents, or 1.3%, to $22.73. Southwest was up 4 cents, or 0.3%, at $15.76.

Even though demand is up at both airlines, it's not necessarily an indication that revenue per passenger will grow. Industry overcapacity has limited the ability of individual airlines to raise prices and pressured unit revenue. In a conference call last week, JetBlue executives warned that fourth-quarter unit revenue, as measured by revenue per available seat mile, or RASM, would likely decrease in the mid-to-high single digits on a percentage basis from last year.

Nevertheless, the industry got a bit of bright news earlier this week when

Continental Airlines

(CAL) - Get Report

estimated that October mainline RASM increased between 0.5% and 1.5% year over year, reversing declines in August and September and better than some analysts had expected. Continental is notable among major airlines because it discloses RASM in its monthly traffic reports.

Also earlier this week, American Airlines' parent

AMR

(AMR)

and

Delta Air Lines

(DAL) - Get Report

said October traffic outpaced capacity, allowing them to increase the percentage of seats filled. AMR said system traffic rose 9.1%, while capacity increased only 2.3%, giving the carrier a load factor of 74.9%, better than 70.2% a year earlier. Notably, American said it decreased domestic capacity by 2.6% and increased international capacity by 13.9%. Analysts have praised such shifts from network carriers, noting that overseas flights tend to be more profitable than domestic ones. Delta's system traffic rose 8.3% on a capacity increase of 6.5%. Its load factor was 74.1%, up 1.2 points from a year earlier.