Airlines to boost capacity only slightly in 2012

The recovering fortunes of the visitor industry will receive only a slight boost from the airlines during the first half of next year.

According to statistics compiled by the trade group Airlines for America, airlines will boost the number of flights into McCarran International Airport during that period by 1.7 percent compared with 2011 and increase the seat count by 1.6 percent.

Strip executives and analysts watch the numbers closely because surveys have shown that people who fly into Las Vegas, particularly convention attendees, tend to stay longer and spend more than those who come by car. That factor has taken on added importance because the valley now has 17,500 more hotel rooms than four years ago.

In the past, the seat-count trend has closely tracked the number of passengers. During the three years through 2010, the number of seats dropped 17.9 percent, according to McCarran records, while the passengers declined 16.7 percent. This year, as airlines began to rebuild their schedules by increasing seats 3.9 percent in the 10 months through October compared with 2010, passenger counts grew by 4.4 percent.

Referring to the projections for next year, Don Voss, vice president of sales and marketing at Treasure Island, said, "I would consider this increase encouraging assuming it is not short term and the upward trend continues in both the additional seats and the consumer demand for those seats."

He noted that the current airline schedules, which could change, come on top of last year's gains.

Credit Suisse gaming industry analyst Joel Simkins noted that outside influences could sway airline schedules in different directions.

"If the broader U.S. economy continues to recover and gaming revenues, hotel rooms and nongaming spend ramp on the Strip, we would expect carriers to consider adding capacity back to Las Vegas," he wrote.

But, he added, if jet fuel prices spike upward, the number of flights could go into reverse.

"(H)istorically, (Las Vegas has) been a high-demand market, but with low margins and without pricing power" for the airlines, he wrote. "(I)t would be hard to absorb the impact of dramatically higher oil" by raising fares, as airlines have done across the country over the past year.

Overall, he concluded, McCarran has enough flights to meet demand.

Further, the impact of American Airlines' bankruptcy filing remains a question mark. The fifth-largest carrier at McCarran this year, American's passenger counts have risen 8.1 percent as it added service, particularly in the face of competition from discounter Spirit. However, American executives have warned of unspecified reductions in the months ahead as the flier tries to reach profitability.

Should the planned flights stay in place, they could help dampen fare increases and make Las Vegas a more attractive destination, Moody's analyst Keith Foley said. However, he added, "The 1.6 percent doesn't sound like a material amount."

But he believes that leisure and corporate demand play more of a role in determining the air capacity than the reverse.

The increased service would help sustain the rebound in visitor counts and spending at a pace that "is not earth-shattering," independent analyst Gregg Carlson said.

"It is another element of progress," he said. "But it will require patience."

More airline seats counterbalance this year's flat car counts on Interstate 15 at Primm, which serve as a rough indicator of the number of people coming from Southern California.

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.