Demand — what do you wager?

empty gate.jpgDemand erosion — it’s as equally unpleasant sounding as it is daunting. But for many of us that’s what we eager to hear airline execs talk about later this month as the frenzied earning season kicks in for Americas-based airlines.

Have the fare increases that were so prevalent earlier this year waned as oil has crept back to the $90 range?  Are trends pointing to a troubling softness in demand?

At this point it’s tough to say. JP Morgan analysts have trimmed their demand forcast 1% for the third and fourth quarters after slicing off 1% in May of this year.

Their take? 

“With demand bouncing around and no clear trajectory just yet, we nonetheless beileve it would be intellectually dishonest no to model for some level of demand weakness in 2H11.”

To illustrate the waxing and waning of demand the analysts at JP Morgan say while June shows some sequential demand softening from May to June, “early channel checks” show July could turn a better performance than June.

Just how severe could the demand erosion be? JP Morgan’s industry watchers think softer demand to only put a dent in the $8 billion in annualized industry fuel savings.

And what’s become of the numerous fare incrases instituded early this year to offset fuel prices in the triple digits per barrel?  Here’s the take from analysts at Rayomd James

“It appears that leisure travelers are resisting the numerous and cumulatively large fare increases implemented by the industry since mid December to offset higher fuel. With the recent slowdown in economic activity, we think airlines will be forced to retrench some of the fare increases.”

Stay tuned for more on demand patterns when the chiefs weigh in.



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