UBS Forecast Sees Slow Rise in Airline Capacity

Following two years of sustained capacity cuts, domestic airlines are expected to slowly add supply this year, though full-year growth should register a modest 1 percent from 2009 levels, according to a forecast issued last week by UBS.

For the first three months of 2010, airline schedules show capacity to down from the same period last year by 2 percent, according to a UBS analyst note examining the top nine U.S. carriers. In the second quarter, carriers plan to add a mere 0.5 percent capacity, schedules show. However, UBS forecast carriers to add 2 percent year over year in the third quarter and 3 percent in the fourth—leading full-year 2010 capacity growth to be in the 1 percent range.

UBS aviation analyst Kevin Crissey in the research note said that low-cost carriers have returned to modest growth "but not nearly to past double-digit levels" that preceded the capacity purge of recent years.

"Ultimately, carriers are likely to be tempted to grow too quickly again, but in 2010 we expect GDP growth to outpace industry capacity growth," Crissey said.

—Nielsen Business Media