Airlines see demand take a dip

— -- Airlines, which had eked out modest growth much of the year despite a tepid global economy, are facing a possible double dip of their own.

They're now reporting lackluster demand, as some nervous companies trim travel budgets and vacationers pull back.

Aggregate second-quarter airline profits worldwide, except for Europe, fell year over year for the first time in eight quarters, the International Air Transport Association (IATA) reports.

"The industry has shifted gears downward," says Tony Tyler, CEO of IATA. "With business and consumer confidence continuing to slump globally, there is not a lot of optimism for improved conditions any time soon."

The slowdown was particularly abrupt in August, with passenger demand falling 1.6% from July, the IATA says. Traffic on U.S. carriers has also been flat, rising just 1.5% through August, according to the Air Transport Association, a trade group for U.S. carriers.

American Airlines, whose share price dropped recently amid concerns about its financial condition, saw its traffic dip 0.4% year-over-year in August, though it rebounded 1.9% in September. Traffic for Delta Air Lines fell 0.9% in September. Demand for US Airways, as reflected in revenue, also fell 0.9% in September.

"There probably is a little double dip here," says Wayne Plucker, an industry analyst at Frost & Sullivan. "Corporations are walking on egg shells. They're not sure what's coming up next."

A downward adjustment may have been expected after the industry posted a record net profit of $15.8 billion worldwide last year. The downturn is comparably mild, Plucker says, and they're more prepared to handle it.

Flights have been cut and fuel prices have stabilized. A USA TODAY analysis of data provided by OAG, the Official Airline Guide, finds airlines have cut domestic seats or flights in 39 states for this month from last October.

"This is a much more survivable thing," Plucker says. "But I also don't foresee fourth-quarter profits to be great."

George Hobica, of Airfarewatchdog.com, says sluggish demand doesn't mean cheaper fares. With eight of every 10 seats filled on U.S. flights, he predicts airlines will continue to seek fare increases. "I can't see how (fares) are not going to go up," he says. "I don't think you should play chicken with airlines this year."