Business travelers are not spending as loosely as in the past for each mile flown. Thus, airlines could falter until the direction of the economy becomes clearer.
According to data released Monday by the International Air Transport Association, the number of business travelers flying international dropped sharply after signs the economy was grinding to a halt. Business flights — meaning, premium traveler ticket sales — fell back to levels unseen since the fourth quarter last year.
Don’t Miss: The Dow’s Fantastic 6 Stocks.
To offset the drop in demand and buttress ticket prices, airlines are getting ready for tighter times and announced they would reduce capacity. The post-Labor Day travel period is expected to be worse than typical for the industry, and investors have been getting out of airline stocks since the middle of July. The NYSE Arca Airline Index is now off by more than 20% in the past three months.
“How bad it could get will be the main subject on conference calls with Wall Street analysts this week, as the airlines post their third-quarter results. According to IATA, forward-looking indicators point to a further slowdown in the months ahead, with the global manufacturers purchasing managers index showing contraction for the first time since mid-2009,” according to MarketWatch.