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Manufacturing Activity Rises for Second Consecutive Month

February 2, 2013 by Leave a Comment

The Institute for Supply Management, a trade group of supply management professionals, said Friday that its index of manufacturing activity jumped to 53.1 in January from 50.2 in December. It was the highest reading since April, when the index hit 54.1.

Any reading above 50 indicates expansion.

In another positive economic report, the Commerce Department said spending on construction projects rose in December, ending a year in which construction activity increased for the first time in six years.

The second straight monthly increase in the manufacturing index showed that activity was starting to grow again after struggling through most of 2012. Uncertainty about tax increases and deep government spending cuts led many companies to reduce orders for machinery and equipment earlier this year. And a weaker global economy dampened demand for American exports.

The report was also encouraging because it showed that demand for factory goods increased while consumers started to pay higher Social Security taxes. That left them with less take-home pay, which could hurt consumer spending.

The survey came hours after the Labor Department reported that employers added 157,000 jobs in January. Manufacturers added 4,000 jobs last month, the fourth straight monthly increase.

“There’s a fair bit of optimism here to start the year,” said Dan Greenhaus, chief global strategist at BTIG LLC, a trading firm based in New York.

Mr. Greenhaus said the solid manufacturing gains, especially in new orders and employment, suggested that “the larger story remains intact, of a moderate, ongoing recovery.”

The I.S.M. report showed that 13 of the 18 industries surveyed had an increase in activity last month. They included manufacturers of plastics and rubber, textiles, furniture, printing, and apparel. Four industries reported contraction: minerals, computers and electronics, wood and chemicals.

The survey’s new orders index returned to growth, rising to 53.3 in January from 49.7 in December. Companies reported adding to their inventories in January after two months of declines, a sign that factories are preparing to increase production.

Slower growth in stockpiles was a major reason the economy shrank at an annual rate of 0.1 percent in the quarter from October to December, the first contraction in three and a half years.

Construction spending rose to a seasonally adjusted annual rate of $885 billion in December, up 0.9 percent from November when spending increased a revised 0.1 percent. For all of 2012, construction spending totaled $850.2 billion, a gain of 9.2 percent from 2011, when construction spending had fallen 3.3 percent. Even with the increase, construction activity is 27.2 percent below its high of $1.17 trillion in 2006 at the peak of the housing boom.

Construction has been posting a slow recovery, led by housing gains. In December, housing and nonresidential construction posted gains but spending on government projects fell.

Article source: http://www.nytimes.com/2013/02/02/business/economy/manufacturing-activity-rises-for-second-consecutive-month.html?partner=rss&emc=rss

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Services Still the Backbone of Job Growth, Data Shows

January 4, 2013 by Leave a Comment

Employers added 155,000 jobs in December, approximately matching the solid but unspectacular monthly rate of the last two years.

Companies increased their orders in November for manufactured goods, reflecting investment plans, even though total orders were unchanged for the month, the Commerce Department said in a second report.

Back-to-back increases in core capital goods followed a period of weakness that raised concerns about business investment, which has been a driving force in the economic rebound.

Analysts say they think that companies will increase spending on computers and other equipment to expand and modernize now that Congress and President Obama have reached a deal on taxes, removing uncertainty that had been weighing on business investment.

In a third report, a gauge of service companies’ activity expanded in December by the most in nearly a year, driven by an increase in new orders and hiring, a trade group said.

The industry group, the Institute for Supply Management, said its index of nonmanufacturing activity rose to 56.1 in December from 54.7 in November. It was the highest level since February and above the 12-month average of 54.7. Any reading above 50 indicates expansion.

Companies had a “year-end surge” in orders, in the words of one executive surveyed by the institute.

Services have been a crucial source of job growth, creating about 90 percent of the net jobs added since January. For all of 2012, the economy added 1.69 million service jobs, about the same as in 2011. Many of the new jobs are in low-paying retail and restaurant industries. The increase conflicted with a Labor Department report Friday that said the economy added just 109,000 service jobs last month, the fewest since June. One important difference between the two reports is the inclusion of construction jobs in the institute’s index. The government index excludes that category, which would have raised the December total by 30,000.

The institute’s report measures service growth in industries that cover 90 percent of the work force, including retail, construction, health care and financial services.

Article source: http://www.nytimes.com/2013/01/05/business/economy/services-still-the-backbone-of-job-growth-data-shows.html?partner=rss&emc=rss

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U.S. Manufacturing Increased Slightly in December

January 2, 2013 by Leave a Comment

WASHINGTON (AP) — American manufacturing grew slightly last month and factory hiring increased. The modest gains suggested that the economy entered the new year with some momentum.

The Institute for Supply Management, a trade group for purchasing managers, said on Wednesday that its index of manufacturing activity rose in December to 50.7. That is up from a reading of 49.5 in November, which was the lowest reading since July 2009, one month after the recession ended.

A reading above 50 indicates growth, while a reading below signals contraction.

A measure of employment increased last month to 52.7. That is up from 48.4 in November, which was the first time the employment gauge fell below 50 in three years.

Factories have cut jobs in three of the four months through November, according to government data. The increase in employment in the I.S.M. survey suggests manufacturers may have stepped up hiring last month.

The Labor Department is scheduled to report on December employment on Friday.

A gauge of new orders was unchanged and production grew more slowly, the survey found. Manufacturers also cut back on stockpiles, a sign of concern about future demand.

The closely watched manufacturing survey was completed before Congress reached a deal to avoid the impending expiration of Bush era tax cuts.

The last-minute deal passed Tuesday averts widespread tax increases and delays deep spending cuts that had threatened to push the country back into recession. But most Americans will see some increase in taxes this year, which will most likely slow consumer spending.

A gauge of export orders rose above 50 for the first time in six months, according to the I.S.M. survey. That is a hopeful sign that overseas economies are improving, raising demand for American goods.

A survey in China on Monday found manufacturing activity in that country expanded for the third consecutive month. That adds to evidence that its economy is improving after a slowdown last year.

Growth in the American economy is being driven by other sectors, like housing. The Commerce Department reported Wednesday that construction companies spent more on home building in November, rising 0.4 percent for its eighth monthly increase.

Overall construction spending, however, slipped 0.3 percent because of a 5.5 percent drop in spending on federal government projects. Spending on commercial buildings, like office buildings and shopping malls, also fell. This was the first decline in overall construction spending since March and followed a 0.7 percent increase in October, which was revised lower.

There have been some positive signs for factory production. In November, companies substantially increased their orders for a category of large equipment that reflects their investment plans. That followed a big increase in the same category in October.

Article source: http://www.nytimes.com/2013/01/03/business/economy/manufacturing-increased-slightly-in-december.html?partner=rss&emc=rss

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Cyber Monday Likely to Be Busiest Online Sales Day

November 25, 2012 by Leave a Comment

Cyber Monday, coined in 2005 by a shopping trade group that noticed online sales spiked on the Monday following Thanksgiving, is the next in a series of days that stores are counting on to jumpstart the holiday shopping season.

It’s estimated that this year’s Cyber Monday will be the biggest online shopping day of the year for the third year in a row: According to research firm comScore, Americans are expected to spend $1.5 billion, up 20 percent from last year on Cyber Monday, as retailers have ramped up their deals to get shoppers to click on their websites.

Amazon.com, which is starting its Cyber Monday deals at midnight on Monday, is offering as much as 60 percent off a Panasonic VIERA 55-inch TV that’s usually priced higher than $1,000. Sears is offering $430 off a Maytag washer and dryer, each on sale for $399. And Kmart is offering 75 percent off all of its diamond earrings and $60 off a 12-in-1 multigame table on sale for $89.99.

Retailers are hoping the deals will appeal to shoppers like Matt Sexton, 39, who for the first time plans to complete all of his holiday shopping online this year on his iPad tablet computer. Sexton, who plans to spend up to $4,000 this season, already shopped online on the day after Thanksgiving known as Black Friday and found a laptop from Best Buy for $399, a $200 savings, among other deals.

“The descriptions and reviews are so much better online so you can compare and price shop and for the most part get free shipping,” said Sexton, who lives in Queens, N.Y., and is a manager at a utility company.

Sexton also said that it’s easier to return an online purchase to a physical store than it had been in previous years. “That helps with gifts,” he said.

How well retailers fare on Cyber Monday will offer insight into Americans’ evolving shopping habits during the holiday shopping season, a time when stores can make up to 40 percent of their annual revenue. With the growth in high speed Internet access and the wide use of smartphones and tablets, people are relying less on their work computers to shop than they did when Shop.org, the digital division of trade group The National Retail Federation, introduced the term “Cyber Monday.”

“People years ago didn’t have … connectivity to shop online at their homes. So when they went back to work after Thanksgiving they’d shop on the Monday after,” said Vicki Cantrell, executive director of Shop.org. “Now they don’t need the work computer to be able to do that.”

As a result, the period between Thanksgiving and Cyber Monday has become busy for online shopping as well. Indeed, online sales on Thanksgiving Day, traditionally not a popular day for online shopping, rose 32 percent over last year to $633 million, according to comScore. And online sales on Black Friday were up 26 percent from the same day last year, to $1.042 billion. It was the first time online sales on Black Friday surpassed $1 billion.

For the holiday season-to-date, comScore found that $13.7 billion has been spent online, marking a 16 percent increase over last year. The research firm predicts that online sales will surpass 10 percent of total retail spending this holiday season. The National Retail Federation estimates that overall retail sales in November and December will be up 4.1 percent this year to $586.1 billion

But as other days become popular for online shopping, Cyber Monday may lose some of its cache. To be sure, Cyber Monday hasn’t always been the biggest online shopping day. In fact, up until three years ago, that title was historically earned by the last day shoppers could order items with standard shipping rates and get them delivered before Christmas. That day changes every year, but usually falls in late December.

Even though Cyber Monday is expected to be the biggest shopping day this year, industry watchers say it could just be a matter of time before other days take that ranking.

“Of all the benchmark spending days, Thanksgiving is growing at the fastest rate, up 128 percent over the last five years,” said Andrew Lipsman, a spokesman with comScore.

Article source: http://www.nytimes.com/aponline/2012/11/25/us/ap-us-cyber-monday.html?partner=rss&emc=rss

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F.C.C. and Wireless Carriers Agree to Alerts to Fight ‘Bill Shock’

October 17, 2011 by Leave a Comment

WASHINGTON — Users of cellphones and other wireless devices who are nearing their monthly limit for voice, text or data services will receive alerts when they are in danger of being charged extra, under an agreement reached by carriers and the Federal Communications Commission.

The agreement, which is to be announced Monday, brings together an industry and a regulator that have fought bitterly this year over the F.C.C.’s attempts to police Internet service providers and over the commission’s review of wireless company mergers. The agreement will begin within a year.

Wireless companies have generally opposed the commission’s recent efforts to dictate how they communicate with customers. But the carriers have also been losing good will with people bitter about the sometimes exorbitant charges resulting from overuse of what has become a consumer staple — the cellphone.

Tens of millions of wireless phone users are hit with overage charges each year, the F.C.C. estimates, based on its own studies and work by the Government Accountability Office and private research firms. The new agreement binds all of the members of the industry’s largest trade group, and therefore covers virtually all of the country’s more than 300 million wireless accounts, according to the F.C.C. chairman, Julius Genachowski.

President Obama, Mr. Genachowski and Steve Largent, president of CTIA — the Wireless Association, the trade group that negotiated for the carriers, hailed the agreement. Mr. Largent, a former congressman and N.F.L. player, said the deal fulfilled a government pledge without imposing burdensome regulations.

President Obama, in a statement, said: “I appreciate the mobile phone companies’ willingness to work with my administration and join us in our overall and ongoing efforts to protect American consumers by making sure financial transactions are fair, honest and transparent.”

For 18 months, the F.C.C. has been investigating what it calls bill shock, what consumers experience when they receive their monthly wireless bill to find unexpected charges of hundreds or thousands of dollars for roaming or overuse of voice and data services. In October, it proposed a regulation that will now be delayed while the commission monitors the industry’s voluntary compliance.

Most wireless contracts call for a customer to pay a flat monthly fee for a fixed number of minutes of talk time. Some plans include a set number of text messages, and others, most often for smartphones, tablets like the iPad, or laptop computer air cards, include a certain amount of data use each month.

A customer exceeding those limits will begin incurring charges that are often far more expensive on a per-unit basis than under the monthly allotments. While many carriers offer several ways for consumers to check their usage, those struck by large bills usually had not regularly done so.

Alerting consumers to data limits is particularly relevant with the explosive growth of the iPad and other tablets, which can consume immense amounts of data in downloading music and books, and streaming movies. The F.C.C. has said that the popularity of tablets and the accompanying growth in data use is contributing to overcrowding of the airwaves, with wireless companies finding that they may eventually not be able to accommodate the demand for downloading.

A 2010 study by the F.C.C. found that one in six mobile device users had experienced bill shock, with 23 percent of those users facing unexpected charges of $100 or more. A separate F.C.C. report noted that 20 percent of the bill shock complaints it received during the first half of 2010 were for $1,000 or more in overage charges. Expensive charges can also be incurred for roaming, when a user travels out of a company’s defined area of coverage or, as often occurs, when traveling overseas.

Even so-called unlimited data plans often have a cap limiting downloads each month to a certain number of megabytes — a technical measure that, unlike a number of calls or minutes, cannot easily be tracked by the uninitiated. Last October, the F.C.C. highlighted the case of a 66-year-old retiree in Dover, Mass., who received an $18,000 bill after a promotional no-limit data plan expired without warning.

Alexander Cullison found out the hard way what can happen when a family member is unaware of usage limits and accounting. Mr. Cullison, a retired resident of Fairfax, Va., received a $400 bill one month recently after his son, whose plan had a monthly limit of 250 text messages, sent and received about 2,000 in one billing period. It was then that Mr. Cullison learned that his wireless company counted each message sent and received as separate items, causing them to build up at least twice as fast as expected.

“This is a good resolution,” Mr. Cullison said, “as long as they advise you that you are going to go over your limit before it actually happens.” Under the agreement, carriers will provide alerts when consumers approach and then exceed their limits on voice, data or texting. In addition, users will receive an alert when their phone links to a cellular system in a foreign country. Some carriers already provide similar alerts.

Companies have the option to deliver alerts by text or voice, but they must be free and automatic. Consumers can opt out of the service if they choose. At least two of the four types of alerts must be started by carriers within 12 months, and all alerts must begin within 18 months.

The companies also agreed to publicize tools for consumers to monitor their own usage. The F.C.C. has teamed with the nonprofit Consumers Union to track companies’ compliance.

“Consumers have been telling us about ‘bill shock’ for a long time, and we’ve been pushing for reforms to crack down on the problem,” said Parul P. Desai, policy counsel for Consumers Union. “Ultimately, this is about helping people protect their pocketbooks, so we applaud the F.C.C. and the industry for this effort to do right by consumers.”

Article source: http://feeds.nytimes.com/click.phdo?i=ca0fe83d76564d78a46a076dcc2dddd4

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Volcker Rule to Take Shape This Week

October 11, 2011 by Leave a Comment

The proposed rules would allow firms to do so in areas where regulators believe healthy markets would not exist without Wall Street’s own trading, including the markets for government bonds, commodities and foreign currencies. And some otherwise-forbidden bets would be allowed only if they are used as a hedge, to keep a Wall Street firm from losing money on a transaction made to accommodate a customer’s trading.

But most trades that Wall Street firms now make with their own money — betting on an individual stock or a basket of shares, for example, or trading complex derivatives and swaps — would be prohibited. The rules, part of the Dodd-Frank law, are intended to limit the ability of banks that have government guarantees and Federal Reserve borrowing privileges to take outsize risks.

That principle seemed fairly simple when it was proposed last year by Paul A. Volcker, the former Federal Reserve chairman who was a sharp critic of bank trading practices leading up to the financial crisis.

But as a 205-page draft of the proposed rules demonstrates, it is more difficult to draw up restrictions that rein in risky trading practices on Wall Street without also killing the ability of beneficial financial markets to operate.

People on both sides of the issue have found things to like and dislike. “There are some encouraging signs in the draft,” Bartlett Naylor, a financial policy advocate for Public Citizen, a pro-consumer group, said in an interview. But, he added, “it doesn’t completely eliminate some of the mischief we saw” in the run-up to the financial crisis.

Randy Snook, executive vice president for business policies and practices at the Securities Industry and Financial Markets Association, the Wall Street trade group, says that while the draft contains some common-sense restrictions on trading by banks, “our concern is that the list of permitted activities might be too narrow.”

The draft, which was dated Sept. 30 and published by the American Banker last week, might be significantly different from what is officially released later this month by the four agencies that are working on the rules: the Office of the Comptroller of the Currency, the Federal Reserve, the Securities and Exchange Commission and the Federal Deposit Insurance Corporation. The F.D.I.C. on Tuesday will be the first to release a version of the rules for a 60-day public comment.

The draft document contains hundreds of questions on which the agencies will seek comments — a sign that “suggests disagreement among agencies” on some of the details, according to lawyers at Davis Polk Wardwell, which prepared a memo for clients last week summarizing the rules.

The most fundamental of those disagreements is likely to be where the line should be drawn between bona fide market-making activity, where a bank’s traders offer to buy and sell a security to meet the trading desires of customers, and short-term trading with the bank acting as a principal in transactions solely for its own benefit.

That could be a particular problem in the corporate bond market, analysts say. Companies usually have one class of equity shares outstanding, and at any given time dozens of investment firms might be offering to buy and sell the stock. But the same company could have hundreds of different bonds outstanding, many of which trade infrequently, if at all.

If a bank’s trading desk offers to take the other side of a transaction desired by a firm’s customer, determining whether that is a short-term trade for the bank’s own benefit or real market-making is a judgment call. According to the draft rules, the volume and risk associated with such a trade must be “proportionate to historical customer liquidity and investment needs.”

That would suggest that a firm that has not previously bought and sold a security could not start doing so — a stance that could significantly limit trading in many corporate bonds. And if investors believe it might be difficult in future years to trade a company’s bonds, its ability to raise money to invest in its business could be difficult.

“If the market-making definition is too narrow, that kind of activity will be curtailed,” Mr. Snook, of the securities industry group, said. “That will cause the cost of financing to go up, restrict the ability of companies to get access to capital and therefore to hire and expand.”

Nr. Naylor of Public Citizen says there should be further limits on market-making activity, especially on “the sort of thinly traded, esoteric instruments for which there is not natural demand” — like some of the collateralized debt obligations and other derivatives whose collapse contributed to the financial crisis.

Moody’s said on Monday that if the draft that surfaced last week was not significantly changed before it became final, it would probably “diminish the flexibility and profitability of banks’ valuable market-making operations and place them at a competitive disadvantage to firms not constrained by the rule.”

Specifically, that means offshore banks and investment firms. There are restrictions against American banks moving otherwise-restricted operations offshore. But banks that do not have subsidiaries operating in the United States can continue to trade freely, both for themselves and on behalf of clients.

A lawyer at one large firm that specializes in the financial business, who spoke on the condition of anonymity because she did not want to bring regulators’ attention to her clients, said that that competitive disadvantage could begin to erode New York City’s importance as a financial center and help the fortunes of offshore banks based in London, Dubai, Hong Kong and elsewhere.

Still others note that the proposed rules call for a significant increase in the level of internal compliance and oversight at banks, something that will discourage the casino culture that has long pervaded the proprietary trading operations of large banks. Large firms could be required to provide to regulators as many as 22 separate metrics or gauges of investment activity each month to prove that they are playing by the rules.

The regulatory staff who worked on the rules would not comment until the document is formally released.

Whether the proposed rules will satisfy Mr. Volcker, who called for the end of “essentially speculative activities” by banks, is unclear. He has declined to comment until an official version of the proposed rules is released.

Article source: http://feeds.nytimes.com/click.phdo?i=360efacea097e805cfb38fa08a667ac2

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Russia Says It’s Close to Joining the W.T.O.

October 5, 2011 by Leave a Comment

Russia’s accession to the organization has been a key goal of the “reset” between Russia and the United States, a reconciliation whose future is uncertain amid political change in both countries. Russia’s first deputy prime minister, Igor I. Shuvalov, said Tuesday that United States officials were vigorously advocating for Russia and that they were near a breakthrough.

“We have Americans working 24 hours a day on our application in order to persuade other W.T.O. members that Russia should get membership before the end of the year,” Mr. Shuvalov said at a United States-Russia trade event in Chicago. “At the beginning of this year, very few people believed it was possible. Now we are very close to that.”

United States officials offered similarly upbeat assessments. One said American officials “see every likelihood” that Russia could obtain membership in December.

Russia has the largest economy of any country not in the 153-member trade group, and the World Bank says that as a member, Russia could bolster its annual gross domestic product as much as 11 percent over the long term, though noncompetitive industries might suffer. The repeated delays have frustrated Prime Minister Vladimir V. Putin, who publicly chastised his officials this spring for complying with regulations of the group, telling them, “Why the hell should they admit us if we already observe everything?”

A top Georgian official said it was premature to celebrate Russia’s accession. The trade group accepts members through a consensus system, meaning that Georgia, which joined in 2000, could block Russia. Although the organization could technically admit Russia through a vote of the majority, that type of accession has never happened.

Russia and Georgia have remained in an icy standoff since they fought a war in 2008, and Russia’s military is deeply entrenched in the Georgian enclaves of South Ossetia and Abkhazia. The countries began negotiating in March, with Georgia asking for international observers to be posted on the Russian side of the enclaves’ borders. The countries have found no common ground, said Giga Bokeria, the secretary of Georgia’s National Security Council.

Mr. Bokeria said the matter was a central topic of his meeting last week with Secretary of State Hillary Rodham Clinton.

“We know our allies are interested in having Russia in the W.T.O., but there is a compromise that has to be reached first,” he said. “The ball is in their court.”

The issue has taken on new significance with the news that Mr. Putin is poised to return to the presidency. Mr. Putin adopted a defiant posture toward the United States in his second presidential term and had little public role in the reset, though he clearly approved of the conciliatory tone set by President Dmitri A. Medvedev. Mr. Shuvalov said Tuesday that he had delivered a message to American officials from Mr. Putin.

“Everyone in the United States should understand that we will not forget the reset,” Mr. Shuvalov said.

In recent days, negotiators appear to have removed most of the remaining obstacles to Russia’s accession, including differences on meat imports, sanitary standards and incentives to Russian automobile producers. Andrei Slepnev, a deputy minister for economic development, said the burst of progress had surprised his team.

“We see today that our accession process is at the very end of its final stage,” said Mr. Slepnev, in comments carried by the Interfax news service. Completing the process by December, he said, “is quite possible if the consensus and the mood achieved within the W.T.O. today are maintained.”

Dominic Fean, a junior research fellow with the French Institute of International Relations, said agreements would have to be completed in the next few days if Russia were to join this year. Mr. Putin’s return to the presidency, he said, has made the outcome “more weighty.”

“If it happens now, it’s a very different political signal in favor of integration,” Mr. Fean said. “It shows that Russian concerns about international standing, and about being present at the forums where important decisions are being made, have not gone away.”

Andrew C. Kuchins, director of the Russia and Eurasia Program at the Center for Strategic and International Studies in Washington, emerged from Mr. Shuvalov’s speech in Chicago with the sense that the sides were “really close to the finish line,” including in negotiations between Georgia and Russia, he said.

“There is not going to be a lot of support and sympathy at the end of the day if it were perceived that the Georgians were holding up W.T.O. accession,” Mr. Kuchins said. “The Russians have got to play ball and be flexible, too. The U.S. government has leaned way forward on this.”

Failure to reach an agreement, he added, “would definitely be a blow to the bilateral relationship.”

Steven Yaccino contributed reporting from Chicago, and Helene Cooper from Washington.

Article source: http://feeds.nytimes.com/click.phdo?i=d3179b7834103ee6dbacd60bad21c3fa

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Air Service Cutbacks Hit Hardest Where Recession Did

July 9, 2011 by Leave a Comment

In the last five years, a review of government statistics shows, air service most often dropped at midsize airports and cities where jobs disappeared or housing prices collapsed. Las Vegas, Phoenix and Detroit, for instance, all lost flights in the 12 months that ended in March.

But traffic has risen at airports where the regional economies have fared better — Denver, San Francisco and Charlotte, N.C., among them.

As a result, the cutbacks are redrawing the nation’s air service map to reflect the industry’s new priorities and changed economics. As recently as a decade ago, the airlines put a premium on growth, competed on every possible route and sought to connect to even the farthest outposts. Now, they are emphasizing fiscal discipline, which means paring back service to many cities and forgoing unprofitable destinations altogether as higher fuel prices weigh on their bottom line.

“The airlines are shrinking and putting a premium on their core network,” said Jeffrey Breen, the founder and president of Cambridge Aviation Research, a consulting firm. “The bottom states have suffered most and have not kept up with the growth in the most robust airports in the country.”

Data collected by the Airport Council International, a trade group, found that the nation’s smallest airports lost 10 to 15 percent of their scheduled flights from June 2006 through this June. Medium-size airports, meanwhile, lost 18 percent of their scheduled flights. But the biggest airports fared relatively better; their traffic dropped by only 2.3 percent over that same five-year period.

The top 50 airports now represent more than 80 percent of all passenger departures, while the 200 smallest airports account for less than 3 percent of passengers.

“How much air service do we really need in Kalamazoo, Mich., or Terre Haute, Ind., where manufacturing was once important?” asked William S. Swelbar, an industry expert at the Massachusetts Institute of Technology. “Do we really need airports there today? Sick economies and high fuel are not going to attract airlines.”

And because fuel prices remain high, the airlines may accelerate their cuts in capacity by the end of the year once the busy summer travel period ends. In the five months through May, the latest period with available figures, 295 of 500 airports in the nation had fewer flights than in the same period last year. In 2010, 315 airports reported fewer flights than the previous year, compared with 414 in 2009.

Nearly 200 airports, most of them tiny and many in remote places, have lost air service entirely since 2008.

“Airlines have made a deliberate decision to forgo certain markets,” said Sunil Harman, who was recently appointed aviation director of the Tallahassee Regional Airport after 17 years as the director of planning for Miami International Airport. “Their new business model is leaving communities disenfranchised and disconnected from the global marketplace.”

Spencer Dickerson, the senior executive vice president of the American Association of Airport Executives, said airline cutbacks were a major challenge. “But in the end, the bottom line is the marketplace,” he said. “If the passengers aren’t there, it’s really hard for the airlines to justify the service.”

Smaller airports may continue to lose service in coming years, while the biggest hubs will become more crowded. The Federal Aviation Administration expects 550 million more passengers to be flying in 2031 than in 2010. It expects the biggest growth will be in the nation’s top hubs.

While there are some broad trends behind the cuts in air service, there are also a variety of explanations of why some airports experienced deeper cuts than others. After Delta Air Lines shut down its hub in Cincinnati/Northern Kentucky International Airport in 2009, departures dropped, falling to 200 flights a day in June from a peak of 670 five years ago. The airport now serves 55 cities, down from over 130, and has only one international destination, Paris.

Article source: http://feeds.nytimes.com/click.phdo?i=c7207303ba01cb16c0ef1226f3e6d189

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Boeing Raises Forecast for Sales by 8.5%

June 17, 2011 by Leave a Comment

The plane maker predicted that airlines would buy 33,500 new jets through 2030. That represented an increase of 8.5 percent from its previous forecast of 30,900 planes, made last July as airlines were just beginning to emerge from a downturn set off by the 2008-9 financial crisis.

Boeing, based in Chicago, said that the new orders would be worth $4 trillion, up 11 percent from the $3.6 trillion forecast a year ago.

“Not only is there a strong demand for air travel and new airplanes today,” said Randy Tinseth, vice president for marketing at Boeing’s commercial airplanes division, “but the fundamental drivers of air travel — including economic growth, world trade and liberalization — all point to a healthy long-term demand.”

The 20-year forecast from Boeing was announced in advance of the Paris Air Show, which opens Monday at Le Bourget Airport.

Airbus in December predicted sales of 26,000 commercial planes through the end of 2029, with a market value of $3.2 trillion.

The International Air Transport Association, a trade group based in Geneva, predicted this month that carriers would report a collective profit of about $4 billion this year after recording a $18 billion profit in 2010. The industry lost a combined $26 billion in the 2008-9 period.

Boeing predicted that global gross domestic product growth would average about 3.3 percent a year over the next 20 years, with the economies of China and India each expected to expand by about 7 percent annually. Global air traffic was likely to continue growing at an average yearly rate of just over 5 percent. Within the Asia-Pacific region, air traffic was likely to grow by an average of 7 percent a year, Boeing said, compared with just 2.3 percent annual growth within North America and 4 percent in Europe.

“We expect passenger traffic to almost triple over the next 20 years, while cargo will more than triple,” Mr. Tinseth said.

The majority of new aircraft sales — about 70 percent — would be of single-aisle planes like the Boeing 737 and the Airbus A320, which normally seat about 150 to 200 passengers, Boeing said. Twin-aisle wide bodies like Airbus’s planned A350-XWB and the coming Boeing 787 Dreamliner would represent about 22 percent.

The single-aisle segment is the most hotly contested for both Boeing and Airbus, which each claim about 50 percent of the market. But the two companies are expected to begin to face competition at the beginning of the next decade when other manufacturers — including Bombardier of Canada and Embraer of Brazil — are expected to start deliveries of jets that can seat similar numbers of passengers.

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Airlines, Now Flush, Fear a Downturn

June 11, 2011 by Leave a Comment

But with the economy slowing down again, the stock market sputtering and high oil prices cutting into household budgets, the airlines may be harder pressed to keep their fares up and planes packed, at least without resorting to significant cuts in capacity when the summer vacation season is over.

Some warning signs are already there. The airlines have failed to raise fares in six of their seven efforts since March, suggesting that some passengers may be balking at the higher ticket prices. “Airlines have overreached,” said George Hobica, the founder of AirFareWatchdog.com.

Still, the airlines’ aggressive pricing strategy has worked well for them. Every major airline has managed to squeeze more revenue out of its passengers this year, thanks not just to higher fares but also to a growing multitude of fees. In May, for instance, United Continental Holdings reported that its estimated revenue per passenger was 14 to 15 percent higher than a year ago, while Southwest Airlines said that measure had risen 11 to 12 percent.

It has not hurt that mergers have left fewer airlines and that they have taken a more disciplined approach to controlling capacity.

For the summer, traditionally the busiest air travel season of the year, demand for airline seats remains strong. The Air Transport Association, the airline trade group, expects 206 million people will fly in June through August, an increase of 1.5 percent over last year. The association even expects the number of passengers on international flights this summer to break last year’s record.

Fares, meanwhile, are at the highest seen since their peak in the third quarter of 2008, when the financial crisis hit, according to statistics compiled by the Department of Transportation.

While fares change daily, the cheapest nonstop round-trip flight from New York to Las Vegas for the July 4 weekend was selling on Friday for $597. The cheapest flight from San Francisco to Boston and back, operated by United Airlines, was selling for $664, but that included one stop. Southwest Airlines was charging $703.80 for the trip, and that was with a stop in both directions. A week in Paris is also expensive — with round-trip fares for nonstop flights starting at $1,442 on American Airlines out of New York.

And these figures do not count the extra fees the airlines now charge, for everything from checked bags to priority boarding to reservation changes or fuel surcharges in international flights.

“It’s getting ridiculously expensive,” said Kevin Currie, a representative with the Teamsters union, who said he might soon curtail visits to relatives in Florida if ticket prices kept rising. “There are more people flying right now, so shouldn’t their prices go down?”

Of course, the airlines do not think that way. Since more passengers are vying for every available seat, they can keep raising fares and still fill their planes.

But there are cheaper fares to be had. Mr. Hobica, of AirFareWatchdog.com, noted that travelers could still buy a $280 round-trip fare between Newark and Los Angeles between July 3 and July 11, for example. “If you are willing to be flexible, there are deals.”

Steven Tilston, the senior director for analysis at Expedia, an online travel agent, agreed. “Flights are getting a little more expensive but that is not happening uniformly.”

Given the steeper fares, some travelers may be tempted to drive instead, despite the rise in gasoline prices. One Web site, BeFrugal.com, developed an online application that helps travelers compute the total cost of flying versus the time needed to drive between any cities.

The Web site calculates that it would take four hours and 50 minutes to get from a specific location in Salt Lake City to downtown Los Angeles by air, and cost $762, including cab fares along the way. The same trip could be made by driving about 11 hours for a total round-trip cost of $292.

This certainly has not been an easy year for the airlines. While air travel has recovered from the recession, fuel prices have surged this year. In addition, the earthquake and tsunami in Japan and the instability in the Middle East cut travel to those places. As a result, the International Air Transport Association slashed its forecast for the global industry’s profitability this week. The global trade group said it expected airline profits to fall sharply this year. Profits for North American carriers will drop to $1.2 billion this year, from $4.1 billion last year, the group said.

This article has been revised to reflect the following correction:

Correction: June 10, 2011

An earlier version of this article referred incorrectly to the airline offering a $664 round-trip fare between San Francisco and Boston. It is United Airlines, not Airways.

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