Portend of things to come?
 

AirTran to scale back growth as demand softens
The Atlanta Journal-Constitution
Published on: 09/08/06

AirTran Airways will trim its growth plans for 2007 and 2008 amid slowing demand, according to reports.

The discount airline, which has its main flight hub in Atlanta, has grown its capacity by 20 percent or more for each of the past few years by aggressively adding new planes and flights.

In a regulatory filing late Thursday the airline's chief financial officer, Stan Gadek, said the carrier is working to trim growth in the next two years and will release details at a later date, Bloomberg News and Dow Jones newswires reported.

One analyst predicted a 2007 growth rate of about 10 percent, which would be less than half this year's planned 25 percent rate.

AirTran also joined Southwest Airlines, US Airways and JetBlue Airways in reporting August revenue that missed projections, as demand wasn't as strong as expected for the highest-priced tickets, Bloomberg reported.

"While the quarter started out with strong unit revenue performance, by the end of August we began seeing softening in demand," Gadek said in the filing, according to wire service reports.

"This trend appears to be continuing into the month of September and likely resulted from the threat of recent terrorist events, tropical storm Ernesto and capacity additions on the East Coast,"Gadek added.

JP Morgan analyst Jamie Baker cut his third-quarter profit forecast for AirTran to 9 cents per share, from 18 cents a share. He cut his fourth quarter estimate to 10 cents a share, from 25 cents.

In a research note Friday, he said he is assuming a 10 percent growth rate for 2007.

He called AirTran's move a "reversal from its heretofore relentless pursuit of growth."

Baker said AirTran has been one of a handful of carriers that have kept growing while other airlines cut back, especially on domestic flights. The overall industry cutback has enabled carriers to raise fares to offset fuel costs while still selling a rising percentage of seats.

"AirTran's change of heart appears to endorse our view that capacity discipline * preached by most but not all in the industry * is in fact contagious," Baker said.

AirTran is headquartered in Orlando but has its main operations base at Hartsfield-Jackson International Airport, where it is the second-largest carrier behind Delta Air Lines.

Delta, reorganizing in bankruptcy court, has reduced overall capacity while also boosting international flying.
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Good; there is too much capacity, and double-digit growth is too much.