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Demand for Air Travel May Have Bottomed Out

The long, steep descent in demand for air travel - and in the fortunes of U.S. airlines - may have temporarily bottomed out.

Two fare hikes imposed by the USA's big, conventional network carriers in the past two weeks, and the expected expiration of several big domestic fare sales tonight, hint at a possible turnaround. But there's no guarantee that the very cheap fares that have been available most of this year are gone for good, or that airline profits will rebound in the second half of the year. Travel analysts say that while fares for travel through mid-August are rising, demand remains historically weak and appears to be strengthening only relative to the sharply reduced number of seats available from U.S. carriers.

The current upward trend in fares could be a blip. Fares for travel in late August and beyond - when the peak summer travel season fades and children return to school - aren't rising yet.

When domestic fare sales expire at midnight, those prices "could go 50% to 60% higher for travel through mid-August," says veteran fare watcher Tom Parsons, CEO of BestFares.com. "So if you're traveling before mid-August you ought to buy before tonight.

"But if you're not traveling until late August or September and October, the prices are still really good," he says.

Most international fare sales will continue until mid-July.

Calling the bottom of the air travel slump has been difficult. In late April, some airline industry leaders cautiously suggested the worst was over and that demand was picking up. Then came the H1N1 virus, better known as swine flu, and rising jet-fuel prices. Corporations, worried about continued economic weakness, slow sales, rising debt, and poor access to credit markets, intensified their efforts to cut travel costs.

The result: Passenger traffic plummeted again in May, prompting the latest round of fare sales. Business travel - on which carriers rely because those tickets are substantially more expensive - remains especially weak.

Giovanni Bisignani, head of the International Air Transport Association, last week called the bottom of the market. But he doesn't expect demand to come roaring back.

"We have lost several years of growth. Airlines are in survival mode. Cutting costs and conserving cash are the priorities."

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