(Reuters) – U.S. carrier Delta Air Lines will watch the wave of orders for the latest Airbus and Boeing planes roll on by and wait for the jets to prove themselves before ordering any, its chief executive told Reuters on Wednesday.

The two airplane makers have orders for more than 3,000 of their narrow-bodied models, the Boeing 737 MAX and the Airbus A320neo, which boast fuel savings of about 15 percent. The new models are to be in service from the second half of the decade.

“We’d rather get toward the end of a production line because one, the airplane has probably been stretched, and stretched economics are always better than the original economics,” the airline’s Chief Executive Officer Richard Anderson told Reuters reporters and editors at Reuters New York headquarters.

Jumping in at the back of the line for a new model allows time for technical difficulties to be resolved, he said.

“Our ideal solution for buying airplanes is to compete Boeing against Airbus against used airplanes; compete GE (GE.N: Quote, Profile, Research, Stock Buzz) against Pratt (UTX.N: Quote, Profile, Research, Stock Buzz) and Rolls-Royce (RR.L: Quote, Profile, Research, Stock Buzz) so that we always have multiple engine manufacturers and multiple airframe manufacturers at the table,” Anderson said. (For a look at Delta’s business performance, click link.reuters.com/tar38t)

In 2011, Delta ordered 100 Boeing 737-900ER models due to be delivered starting later this year, but it has not bought either the Boeing 737 MAX or the Airbus A320neo.

Rival U.S. airlines such as United Continental Holdings (UAL.N: Quote, Profile, Research, Stock Buzz) and AMR Corp’s (AAMRQ.PK: Quote, Profile, Research, Stock Buzz) American Airlines, which plans to merge with US Airways Group (LCC.N: Quote, Profile, Research, Stock Buzz) this year and form the world’s biggest carrier, have already placed orders for the re-engineered jets that are due for delivery over the next few years.

Anderson said Delta’s deal with Boeing allowed it to convert the last 40 of the 737-900ER aircraft it has on order to the newer MAX model.

“We will evaluate it, but we would rather see some other people fly that engine around for a while,” Anderson said. CFM International, a joint venture of General Electric and France’s Safran (SAF.PA: Quote, Profile, Research, Stock Buzz), makes engines for the 737 MAX.

As planemakers try to get airlines to buy their newest designs, prices on existing models become heavily discounted. Established models also tend to be more reliable as early technical problems are ironed out.

‘PROVEN PRODUCTS’

“We would rather see proven products that have cash-on-cash returns from the moment we take delivery,” Anderson said. “That is much more important.”

While manufacturers are playing up double-digit percentage reductions in fuel costs in their newest models, which are equipped with more fuel-efficient engines, Delta prefers to buy aircraft toward the end of their production cycle when prices are lower.

“The airplane salesmen always show you charts that have these big operating savings,” Anderson said. “But the charts never have the capital cost, so it is a little bit of a fallacy to analyze airplanes without the capital costs included.”

Airbus recently began talking up the lower ownership cost of its A330 wide-body jet as it defends the model against a proposed new stretched version of Boeing’s Dreamliner called the 787-10X. Airbus told a U.S. industry conference in March that the A330, whose sales have held up better than expected due in part to 787 delivery delays, could compete with the 787, implying price discounts to outweigh higher fuel consumption.

“We operate 33 A330s and were a launch customer in the U.S.,” Delta’s Anderson said. He added that should Boeing hope that its stretched 787 will take sales from the A330, “its prices have to come way down.”

Anderson declined to comment on reports that Delta is looking at placing orders for around 20 narrow-body jets and 20 current-generation, wide-body A330s or Boeing 777s.

(Reporting by Karen Jacobs in Atlanta, additional reporting by Tim Hepher in Paris; Editing by Leslie Gevirtz)

(Reuters) – Online travel agency Priceline.com on Thursday gave a forecast for second-quarter profit that was below analysts’ estimates, as it cited the effects of global expansion costs, and its shares slid 3 percent in after-hours trading.

Priceline made the comments as it reported a first-quarter profit that topped estimates on improved hotel and car-rental reservations.

Chief Executive Jeffery Boyd said the second-quarter outlook reflects an expected decline in operating margins as the company invests in global growth.

“We’ve got an opportunity to continue to build out the international franchise of our businesses and that requires investment in marketing and in people in a very competitive marketplace,” Boyd said in a telephone interview.

“Most of our growth investors are very encouraging of that strategy to really make sure that we’re not under-investing in the business,” Boyd added.

Priceline owes much of its success to international bookings on its Booking.com travel site. It competes with Expedia and Orbitz Worldwide, which earlier on Thursday forecast revenue for the second quarter above current analyst estimates, citing growth in its hotel business.

In the first quarter, operating expenses at Priceline rose 39 percent to $699.8 million as it spent on advertising to support its international brands.

Hotel room-night reservations and booked rental car days increased about 38 percent and 43 percent, respectively, in the first quarter, while airline tickets booked rose 1.4 percent.

Net income was $244.3 million, or $4.76 a share, in the first quarter, compared with $181.8 million, or $3.54 a share, a year earlier.

Adjusted for items, first-quarter profit was $5.76 a share, compared with $5.27 a share expected by analysts on average, according to Thomson Reuters I/B/E/S.

Quarterly revenue rose about 26 percent to $1.3 billion, compared with $1.28 billion expected by analysts.

Gross bookings, or the value of travel services customers bought, rose 36 percent to $9.2 billion in the first quarter.

Priceline forecast earnings of $8.87 to $9.45 a share for the current second quarter. Analysts have expected $9.58 a share.

Priceline also said it expects to close its $1.8 billion purchase of smaller rival Kayak Software Corp on May 21 now that regulatory approvals have been received. The acquisition will bolster Priceline’s travel research and advertising capabilities.

Shares of Priceline fell to $714.50 in extended trading from their Nasdaq close of $737.50.

(Reporting by Karen Jacobs in Atlanta; Editing by Alden Bentley, Andrew Hay and Leslie Adler)

(Reuters) – Delta Air Lines Inc (DAL.N: Quote, Profile, Research) plans to return $1 billion (643.16 million pounds) to shareholders over the next three years, starting with its first dividend in a decade and a $500 million share buyback program, the company said on Wednesday.

The initiatives are part of a five-year plan that seeks to generate as much as $5 billion in value for investors, the carrier said in a statement.

The move shows that airlines, which weathered a tough decade after the September 11, 2001, attacks, have gained more solid financial footing and are now focusing on improving their investment potential.

“With the Delta announcement here, it’s going to signal that the industry has indeed changed,” said Chris Terry, an analyst with Hodges Capital Management in Dallas. “Profitability seems sustainable, and I think it’s just going to open up the industry to more investors.”

U.S. carriers have merged, stopped flying money-losing routes and created new revenue streams with baggage and food fees to restore profitability. Fare increases have also helped improve revenue and earnings in the last few years.

Among the major U.S. carriers, Southwest Airlines (LUV.N: Quote, Profile, Research) also pays a dividend and repurchases shares.

Terry said he expects other airlines to unveil plans to boost shareholder value as they reach return-on-capital goals. “The timing on that is probably the biggest question,” he said.

SEPTEMBER DIVIDEND

Delta declared a quarterly dividend of 6 cents a share, to be paid September 10 to shareholders of record August 9. Its board also approved a share repurchase program of $500 million, due to be completed by June 30, 2016.

Shares of Delta touched a new year high, rising 3.3 percent to $18.67 in afternoon trading.

United Continental Holdings (UAL.N: Quote, Profile, Research), the current industry leader, was down 0.3 percent to $33.28 and US Airways Group (LCC.N: Quote, Profile, Research), which plans to acquire AMR’s Corp (AAMRQ.PK: Quote, Profile, Research) American Airlines, rose about 3 percent to $17.48. Southwest was up 1 percent to $14.38.

Delta, which filed for bankruptcy in 2005 and acquired Northwest Airlines in 2008, has improved profits and reduced debt in recent years. It last paid a common stock dividend in 2003, and its last share buyback plan was in 2000.

To cut costs, Delta has been retiring fuel-guzzling planes and acquiring used aircraft, and it bought a Pennsylvania oil refinery last year.

The carrier, second largest behind United Continental, has upgraded food and wine offerings and sold seats with more legroom to boost revenue. Delta has also set up partnerships with non-U.S. airlines such as Britain’s Virgin Atlantic to position itself to win new customers, and has expanded flights in lucrative markets such as New York.

The initiatives have strengthened a host of financial metrics at Delta since 2009. For example, net debt stood at $11.7 billion at the end of 2012, down from $17 billion three years earlier. Delta said it expects net debt to fall to $10 billion by the end of this year and added its financial plan would further reduce that to $7 billion.

The carrier said last year that it would outline a capital deployment strategy in the first half of 2013.

“We think this move highlights how Delta has somewhat reduced risk in the historical boom and bust airline industry, which we think is attracting increased investor interest,” S&P Capital IQ equity analyst Jim Corridore said in a note to clients.

The plan outlined on Wednesday also calls for Delta to spend $2 billion to $2.5 billion a year on improvement for planes, technology and facilities over the next five years.

Delta also said it would contribute as much as $1 billion to its pension plans in the next five years, on top of the required minimum annual contribution of $650 million to $700 million.

(Reporting by Karen Jacobs in Atlanta; Additional reporting by Tej Sapru in Bangalore; Editing by John Wallace and Andrew Hay)

(Reuters) – Delta Air Lines Inc (DAL.N: Quote, Profile, Research, Stock Buzz) plans to return $1 billion to shareholders over the next three years, starting with its first dividend in a decade and a $500 million share buyback program, the company said on Wednesday.

The initiatives are part of a five-year plan that seeks to generate as much as $5 billion in value for investors, the carrier said in a statement.

The move shows that airlines, which weathered a tough decade after the September 11, 2001, attacks, have gained more solid financial footing and are now focusing on improving their investment potential [ID:nL1N0BS0W2].

“With the Delta announcement here, it’s going to signal that the industry has indeed changed,” said Chris Terry, an analyst with Hodges Capital Management in Dallas. “Profitability seems sustainable, and I think it’s just going to open up the industry to more investors.”

U.S. carriers have merged, stopped flying money-losing routes and created new revenue streams with baggage and food fees to restore profitability. Fare increases have also helped improve revenue and earnings.

Terry said he expects other airlines to unveil plans to boost shareholder value as they reach return-on-capital goals. “The timing on that is probably the biggest question,” he said.

SEPTEMBER DIVIDEND

Delta declared a quarterly dividend of 6 cents a share, to be paid September 10 to shareholders of record August 9. Its board also approved a share repurchase program of $500 million, due to be completed by June 30, 2016.

Shares of Delta were up 2 percent to $18.44 in morning trading, and other major airlines also rose.

United Continental Holdings (UAL.N: Quote, Profile, Research, Stock Buzz), the current industry leader, was up 1 percent to $33.73 and US Airways Group (LCC.N: Quote, Profile, Research, Stock Buzz), which plans to acquire AMR’s Corp (AAMRQ.PK: Quote, Profile, Research, Stock Buzz) American Airlines, gained 1.6 percent to $17.25.

Delta, which filed for bankruptcy in 2005 and acquired Northwest Airlines in 2008, has improved profits and reduced debt in recent years. It last paid a common stock dividend in 2003, and its last share buyback plan was in 2000.

To cut costs, Delta has been retiring fuel-guzzling planes and bought an oil refinery last year. It is also launching partnerships with non-U.S. airlines to position itself to win new customers, and has expanded flights in lucrative markets such as New York.

The carrier said last year that it would outline a capital deployment strategy in the first half of 2013.

“We think this move highlights how Delta has somewhat reduced risk in the historical boom and bust airline industry, which we think is attracting increased investor interest,” S&P Capital IQ equity analyst Jim Corridore said in a note to clients.

Delta also said it would contribute as much as $1 billion to its pension plans in the next five years, on top of the required minimum annual contribution of $650 million to $700 million.

(Reporting by Karen Jacobs in Atlanta; Additional reporting by Tej Sapru in Bangalore; Editing by John Wallace)

“It’s untenable as it is,” Parker said in an interview on
Wednesday in Scottsdale, Arizona, where US Airways held
briefings with media.

“We can’t do this for long without having major disruption
to the flying public. And nobody wants that. We’re highly
hopeful something will get resolved soon.”

U.S. air travelers have endured delays at some airports this
week as furloughs of air traffic controllers started. Airlines
have forecast hundreds of millions of dollars in lost revenue
from the furloughs that have been imposed by the Federal
Aviation Administration.

The FAA has outlined plans to idle 47,000 workers for up to
11 days through the end of September as part of its plan to meet
required spending curbs. Nearly 13,000 of those staffers are air
traffic controllers.

The airline industry has expressed concern that delays from
the furloughs could depress travel as the critical summer season
gets underway.

Parker said he spent a lot of his personal time in the past
week calling government officials in his carrier’s hub markets
to stress the need to end the furloughs.

“Everyone understands the severity of the situation,” Parker
said. “Good-minded people are trying to figure out ways to stop
it. We don’t need finger-pointing, we need solutions.”

US Airways plans to merge with American Airlines parent AMR
Corp this year and form the world’s biggest carrier.
The company said on Wednesday it expected the combination to
close by the end of September.

Parker will be chief executive of the new American Airlines
once the merger closes. The $11 billion all-stock merger would
finalize the consolidation of legacy U.S. airlines that has
helped put the industry on more solid financial footing.

The tie-up would help US Airways and American better compete
with United Continental Holdings and Delta Air Lines
, both the products of mergers.

(Reporting by Karen Jacobs. Editing by Andre Grenon)

Delta forecast a positive operating margin for the current
quarter but added that U.S. government spending cuts and lighter
demand from leisure travelers were expected to hurt a key
revenue measure in April.

US Airways, which plans to merge with AMR Corp’s
American Airlines this year and form the world’s biggest
carrier, said its bookings were higher year-over-year for May
and the summer, but added that business demand has been
pressured since spending cuts known as “sequestration” began.

Investors shrugged off the revenue concerns. Delta shares
were 9.9 percent higher and those of US Airways were up 4.8
percent, both in late afternoon trading.

“We’re seeing the impacts of consolidation, overall capacity
discipline and better operational management showing up in the
form of improved results,” said Fred Lowrance, an airline
analyst with Avondale Partners.

U.S. airlines have merged, curbed unprofitable routes and
raised ticket prices to recover in recent years. Carriers are
also cutting back flying to match demand and have gained new
revenue streams from baggage and food fees, moves that have
helped keep profits coming.

REVENUE OUTLOOK

But an uncertain macroeconomic backdrop could pose
challenges for travel over the next few months.

This week, staff furloughs at U.S. air traffic control
towers took effect, causing delays at some airports but so far
not the widespread chaos some transport regulators had warned
about. Airlines have forecast hundreds of millions of dollars in
lost revenue from the furloughs, imposed by the Federal Aviation
Administration.

“It’s hard to quantify what exactly (sequestration effects)
would be,” said Matthew Jacob, an airline analyst with ITG
Investment Research.

“Investors are more interested in the profitability
continuing and the strong earnings despite what appears to be
slowing (revenue) trends,” Jacob added.

Delta mentioned weaker ticket sales in its defense business
tied to the sequester. It also said the weaker yen had hurt
results, and added it was considering possible flight reductions
in the Pacific region as a result.

US Airways said its government revenue fell more than 30
percent in March, a result of the budget cuts as well as the
Easter holiday shift into March from April last year.

“Leisure demand is still good,” US Airways President Scott
Kirby said during a conference call. “Business demand remains
volatile, however, and as long as the sequester stays in place I
expect the government-related demand will continue to be
depressed.”

Delta added it expected declining oil prices to help offset
its near-term revenue weakness.

“We anticipate the lower fuel costs, combined with prudent
capacity management, will more than offset any revenue
softness,” Chief Executive Richard Anderson said during a
conference call.

Delta’s posted a net income of $7 million, or 1 cent a
share, for the first quarter, compared with $124 million, or 15
cents a share, a year earlier. Excluding items, profit was 10
cents a share, compared with 6 cents expected by analysts on
average, according to Thomson Reuters I/B/E/S.

US Airways reported a first-quarter profit of $44 million,
or 26 cents a share, compared with $48 million, or 28 cents a
share, a year earlier. Excluding items, its profit was 31 cents
a share, topping analysts’ average estimate of 28 cents.

Delta’s revenue rose 1 percent to $8.5 billion, while US
Airways Group’s climbed 3.5 percent to $3.4 billion.

Delta forecast a positive operating margin for the current
quarter but added that U.S. government spending cuts and lighter
demand from leisure travelers were expected to hurt a key
revenue measure in April.

US Airways, which plans to merge with AMR Corp’s
American Airlines this year, said its bookings were higher
year-over-year for May and the summer, but said business demand
has been pressured since spending cuts known as “sequestration”
began.

Investors shrugged off the revenue concerns. Delta shares
rose 8.3 percent and US Airways gained 3.3 percent in afternoon
trading.

“We’re seeing the impacts of consolidation, overall capacity
discipline and better operational management showing up the form
of improved results,” said Fred Lowrance, an airline analyst
with Avondale Partners.

U.S. airlines have merged, curbed unprofitable routes and
raised ticket prices to recover in recent years. Carriers are
also cutting back flying to match demand and have gained new
revenue streams with baggage and food fees, moves that have
helped keep profits coming.

REVENUE OUTLOOK

But an uncertain macroeconomic backdrop could pose
challenges for travel over the next few months.

This week, staff cuts at U.S. air traffic control towers
took effect, causing delays at some airports but so far not the
widespread chaos some transport regulators had warned about.

“It’s hard to quantify what exactly (sequestration effects)
would be,” said Matthew Jacob, an airline analyst with ITG
Investment Research.

“Investors are more interested in the profitability
continuing and the strong earnings despite what appears to be
slowing (revenue) trends,” Jacob added.

Delta mentioned weaker ticket sales in its defense business,
which accounts for about 3 percent of overall sales, tied to the
sequester. US Airways said its government revenue fell more than
30 percent in March, a result of the budget cuts as well as the
Easter holiday shift into March from April last year.

“Leisure demand is still good,” US Airways President Scott
Kirby said during a conference call. “Business demand remains
volatile, however, and as long as the sequester stays in place I
expect the government related demand will continue to be
depressed.”

Delta added it expected declining oil prices to help offset
the near-term revenue weakness.

“While we are seeing some revenue softness, we are also
benefiting from lower fuel costs, allowing us to continue our
path of margin expansion even in a sluggish economic
environment,” President Ed Bastian said in a company statement.

Delta’s net income was $7 million, or 1 cent a share, for
the first quarter, compared with $124 million, or 15 cents a
share, a year earlier. Excluding items, profit was 10 cents a
share, compared with 6 cents expected by analysts on average,
according to Thomson Reuters I/B/E/S.

US Airways had a first-quarter profit of $44 million, or 26
cents a share, compared with $48 million, or 28 cents a share, a
year earlier. Excluding items, its profit was 31 cents a share,
topping analysts’ average forecast of 28 cents.

Delta’s revenue rose 1 percent to $8.5 billion, while US
Airway’s climbed 3.5 percent to $3.4 billion.

(Reuters) – Air travelers experienced delays at some U.S. airports on Monday as staff cuts at control towers took effect, but the widespread havoc and hour-long waits that regulators had predicted last week largely failed to materialize.

Instead, the U.S. air system operated as it would if only a few bouts of bad weather had affected schedules.

Still, airlines predicted sizable disruption and hundreds of millions of dollars in lost revenue if delays happen as predicted and persist for a year. And travel groups said safety concerns and inconvenience could curb business travel.

The Federal Aviation Administration said on Monday that it was grappling with “staffing challenges” at air-traffic control facilities in New York, Dallas-Fort Worth, Los Angeles and Jacksonville, Florida. Controllers were spacing aircraft farther apart for takeoffs and landings, causing delays, the FAA said.

But late in the day, only 150 flights had been canceled, a relatively small number, according to website Flightaware.com. And although some travelers waited nearly two hours for flights, delays were much shorter on average.

For example, as of late afternoon New York time, flights to Charlotte Douglas International Airport were delayed an average of 22 minutes, the FAA’s website showed. A flight delay of 15 minutes or less is considered on time, so a 22-minute delay is minimal by industry standards.

Flights to Florida were delayed earlier on Monday because of staffing cuts and weather, said Mark Duell, vice president of operations at FlightAware.com, a flight tracking website.

“Staffing-related delays come and go,” Duell said. So far, “it’s only a problem if there some other condition that’s going on.”

Delays at New York’s major airports and in Denver were due staffing and other factors, Duell said. By contrast, Hartsfield-Jackson Atlanta International, the nation’s busiest airport, and Chicago’s O’Hare, reported no significant delays, the FAA said.

INDUSTRY VOICES CONCERN

The FAA furloughs, which started Sunday, are intended to cut staffing by 10 percent to save $200 million of $637 million the agency needs to pare from its budget. Of 47,000 employees facing furloughs, which are expected to last through September, nearly 13,000 are air traffic controllers.

New York’s LaGuardia and John F. Kennedy airports and Los Angeles International Airport grappled with delays of up to an hour and a half on Sunday, when the furloughs began, Duell said. The FAA said there were 400 flight delays on Sunday related to the furloughs.

Despite the improvement Monday, airlines and business advocacy groups continued to voice concern that staffing cuts would reduce corporate travel and hurt the economy.

Southwest Airlines said its estimated conservatively that furloughs would cost it $200 million a year if implemented to the full extent the FAA has outlined.

The comment was contained in a motion filed Friday by Airlines for America (A4A), a trade group of airlines. The group said it was still pressing in court for a 30-day delay of the staff cuts, after the court denied its request last week for an emergency stay of the furloughs.

American Airlines, also in an affidavit with the A4A motion, estimated furloughs would result in 582 daily flight delays and losses of $1.77 million a day.

Delta Air Lines said it might have to cancel 152 flights a day, most on regional planes operated by connection carriers, losing an estimated $575,000 a day in revenue.

Furloughs “will produce missed connections and widespread flight cancellations,” the Global Business Travel Administration, a trade group, said in an open letter to FAA Administrator Michael Huerta that was distributed on Friday.

“If these disruptions unfold as predicted, business travelers will stay home.”

Jean Covelli, president of The Travel Team agency in Buffalo, New York, said many business customers are rethinking plans for trips now that the furloughs have started.

“There is grave concern about safety,” she said. “Businesses are canceling meetings. There’s a whole domino effect that this is causing. I don’t think it’s going to get any better.”

But on Monday, some major airlines said there were no flight cancellations due to the furloughs. Southwest Airlines said it expects “possible flight delays” from the staffing cuts but added it had no major problems with operations on Monday. American Airlines reported no issues other than normal ground delays.

United Airlines said the nation’s air space “functioned pretty well” during the day on Sunday. But “we saw alarming pockets of degradation due to FAA staffing in Los Angeles and LaGuardia both last night and this morning,” spokeswoman Megan McCarthy said in a statement on Monday.

“We are concerned about how this is going to evolve and affect air travel reliability for our customers.”

(Reporting by Karen Jacobs; Additional reporting by Dana Feldman in Los Angeles; Editing by Alwyn Scott and Steve Orlofsky)

Instead, the U.S. air system operated as it would if only a
few bouts of bad weather had affected schedules.

Still, airlines predicted sizable disruption and hundreds of
millions of dollars in lost revenue if delays happen as
predicted and persist for a year. And travel groups said safety
concerns and inconvenience could curb business travel.

The Federal Aviation Administration said on Monday that it
was grappling with “staffing challenges” at air-traffic control
facilities in New York, Dallas-Fort Worth, Los Angeles and
Jacksonville, Florida. Controllers were spacing aircraft farther
apart for takeoffs and landings, causing delays, the FAA said.

But late in the day, only 150 flights had been canceled, a
relatively small number, according to website Flightaware.com.
And although some travelers waited nearly two hours for flights,
delays were much shorter on average.

For example, as of late afternoon New York time, flights to
Charlotte Douglas International Airport were delayed an average
of 22 minutes, the FAA’s website showed. A flight delay of 15
minutes or less is considered on time, so a 22-minute delay is
minimal by industry standards.

Flights to Florida were delayed earlier on Monday because of
staffing cuts and weather, said Mark Duell, vice president of
operations at FlightAware.com, a flight tracking website.

“Staffing-related delays come and go,” Duell said. So far,
“it’s only a problem if there some other condition that’s going
on.”

Delays at New York’s major airports and in Denver were due
staffing and other factors, Duell said. By contrast,
Hartsfield-Jackson Atlanta International, the nation’s busiest
airport, and Chicago’s O’Hare, reported no significant delays,
the FAA said.

INDUSTRY VOICES CONCERN

The FAA furloughs, which started Sunday, are intended to cut
staffing by 10 percent to save $200 million of $637 million the
agency needs to pare from its budget. Of 47,000 employees facing
furloughs, which are expected to last through September, nearly
13,000 are air traffic controllers.

New York’s LaGuardia and John F. Kennedy airports and Los
Angeles International Airport grappled with delays of up to an
hour and a half on Sunday, when the furloughs began, Duell said.
The FAA said there were 400 flight delays on Sunday related to
the furloughs.

Despite the improvement Monday, airlines and business
advocacy groups continued to voice concern that staffing cuts
would reduce corporate travel and hurt the economy.

Southwest Airlines said its estimated conservatively
that furloughs would cost it $200 million a year if implemented
to the full extent the FAA has outlined.

The comment was contained in a motion filed Friday by
Airlines for America (A4A), a trade group of airlines. The group
said it was still pressing in court for a 30-day delay of the
staff cuts, after the court denied its request last week for an
emergency stay of the furloughs.

American Airlines, also in an affidavit with the
A4A motion, estimated furloughs would result in 582 daily flight
delays and losses of $1.77 million a day.

Delta Air Lines said it might have to cancel 152
flights a day, most on regional planes operated by connection
carriers, losing an estimated $575,000 a day in revenue.

Furloughs “will produce missed connections and widespread
flight cancellations,” the Global Business Travel
Administration, a trade group, said in an open letter to FAA
Administrator Michael Huerta that was distributed on Friday.

“If these disruptions unfold as predicted, business
travelers will stay home.”

Jean Covelli, president of The Travel Team agency in
Buffalo, New York, said many business customers are rethinking
plans for trips now that the furloughs have started.

“There is grave concern about safety,” she said. “Businesses
are canceling meetings. There’s a whole domino effect that this
is causing. I don’t think it’s going to get any better.”

But on Monday, some major airlines said there were no flight
cancellations due to the furloughs. Southwest Airlines said it
expects “possible flight delays” from the staffing cuts but
added it had no major problems with operations on Monday.
American Airlines reported no issues other than normal ground
delays.

United Airlines said the nation’s air space
“functioned pretty well” during the day on Sunday. But “we saw
alarming pockets of degradation due to FAA staffing in Los
Angeles and LaGuardia both last night and this morning,”
spokeswoman Megan McCarthy said in a statement on Monday.

“We are concerned about how this is going to evolve and
affect air travel reliability for our customers.”

But business is off by about a third this season as NASA has
withdrawn from the conference, one of many government agencies
cutting spending to meet $85 billion in budget cuts that must be
made by Sept. 30 known as “sequestration.”

“We’re still taking reservations,” said the Cheyenne
Mountain Resort’s general manager, Todd Felsen, who has 100
vacant rooms. “Last year at this time, we were over booked.”

As the U.S. travel industry nears its summer upswing,
airlines and hotels are joining other companies in warning about
lost revenue due to federal budget cuts that started in March –
and fear they’ll lose much more.

This week, Delta Air Lines and US Airways Group
said reduced last-minute bookings by government workers
cut their unit revenue in March, sparking a selloff in airline
stocks.

Shares of F5 Networks Inc plunged 18 percent on
Friday, after the network equipment maker partly blamed lower
government sales for its profit warning – news that also
pressured shares of rivals Juniper Networks Inc and
Cisco Systems Inc..

Last month, Britain’s Smiths Group Plc, an
engineering concern whose products range from explosive
detectors to surgical needles, warned of lower revenue due to
U.S. government spending cuts.

“The outlook for summer earnings is dropping daily,” as
sequester cuts get factored into the economy, said Jim Brown,
editor at options analytics firm optioninvestor.com. With Europe
and China in decline, he sees a risk that the United States
could slip back recession.

COST-CUTTING GROWS

The travel industry offers a window into the domino effect
of government cutbacks. Federal, state and local governments
spent about $30 billion a year on travel in 2011, according to
the U.S. Travel Association, and the effect of reduced travel on
the movement of goods and people, business meetings, leisure
industries and tax revenue is significant. The Federal Aviation
Administration estimates that commercial aviation helps generate
$1.3 trillion in annual economic activity in the United States.

U.S. budget officials could not say how much federal travel
was being cut in the current fiscal year, but historical tallies
provide a clue. In fiscal 2012, federal agencies cut travel
spending by about $2 billion from fiscal 2010, a budget official
told lawmakers in late February.

Recent anecdotal evidence suggests government agencies are
scaling back travel even more this year. The National
Aeronautics and Space Administration announced last month that
it would not attend the National Space Symposium, the annual
space conference set for April 8-11 in Colorado Springs. NASA
Administrator Charles Bolden, who typically addresses the
conference, also will not be attending.

Travel cost-cutting will help save NASA an estimated $10
million in the current fiscal year, the agency said, noting it
already trimmed conference and travel spending aggressively in
the past. “With sequestration in place, we are further
curtailing these types of non-mission critical activities,” NASA
spokesman Allard Beutel said in an email.

Those cuts ripple through the broader economy. The nonprofit
foundation that hosts the space conference estimated government
attendance this year was down by about 200 people. The meeting
brings millions of dollars to the Colorado Springs economy, and
allows the community to showcase its picturesque mountain views.

“This is our Super Bowl,” said Felsen, of the Cheyenne
Mountain Resort.

AIR TRAVEL CONCERNS

The effects of sequestration come as hotels and airlines are
recovering from the 2008-09 downturn. Many U.S. airlines marked
their third straight year of profitability in 2012 despite high
oil prices. U.S. hotels have posted three years of gains in
occupancy and average daily rates after declines in both
measures in 2009, according to data from Smith Travel Research.

As the budget tightening continues, the travel industry is
growing increasingly concerned that plans to furlough air
traffic controllers and trim spending on customs and border
patrol will cause long delays at major airports that could keep
business and leisure flyers away, and slow cargo shipments.

While those factors have not affected travel so far, some
travel agents says customers are voicing fears about flight
delays and long security lines at airports this summer.

Julia Jacobo, an executive assistant with Cook Travel in New
York, said some customers are hesitant to book international
flights, which are most profitable for carriers.

“For now, people are still flying,” Jacobo said. “But due to
our clients’ concerns and hesitation, we are worried about what
this will mean for bookings in the future.”

Airport officials say it’s still unclear what will happen
when controller furloughs begin April 21. They warn disruptions
are possible, and say travelers should arrive early for flights
and be prepared for delays.

At Hartsfield-Jackson Atlanta International Airport,
controller furloughs could close one of five runways, which
could lead to flight delays or cancellations.

“We’re planning for the worst case scenario,” said Louis
Miller, the airport’s general manager. “We’re hoping that
Congress and the Administration can get something worked out”
before the furloughs start.

DC AREA HOTELS TAKE HIT

For hotels, government belt-tightening poses challenges
mainly for the Washington, D.C., area, which is seeing soft
bookings.

“At least 30 percent of (that market’s) business is
government related, if not more,” said Patrick Scholes, a New
York-based hotel analyst with SunTrust Robinson Humphrey.

Outside of Washington, effects of sequestration don’t appear
to be showing up in a major way, he said.

But hotels had been feeling reduced government spending even
before sequestration took effect. Budget uncertainties led to
cancellations of several air shows, including Virginia’s Langley
air show and the 2013 Wings Over Wayne Open House and Air Show
at Seymour Johnson Air Force Base near Goldsboro, North
Carolina, both of which had been scheduled for May.

Mark Carrier, president of B.F. Saul Company Hospitality
Group, a Bethesda, Maryland-based operator of 20 hotels, said
there has been a noticeable drop in business since January tied
to sequestration. Sixteen of his company’s hotels are in the
Washington area.

“It’s everything from the agencies saying ‘we’re not going
to have meetings or do the training that we planned’ to
situations where the normal demand just isn’t showing up,”
Carrier said. “It’s really a significant thing here regionally.”

As government business decreased, spending by defense
contractors such as Boeing Co and Northrop Grumman Corp
have also dropped off, Carrier said. At B.F. Saul hotels
in the Washington region, 20 to 25 percent of business is
directly dependent on the federal government, while another 20
to 25 percent is related to contractors, he added.

As a result, B.F. Saul expects a significant drop in hotel
revenues this year from 2012, Carrier said. That follows flat
revenue the past two years, he said.

“We just have no way to offset the demand change in
government and the contractors,” Carrier said.

Scholes said the D.C.-area hotel weakness is likely to have
a minimal effect on globally diverse hoteliers such as Marriott
International and Starwood Hotels and Resorts Worldwide
, which are benefiting from strength in other U.S.
markets such as San Francisco and Texas.

But, he said, sequestration “definitely makes it a
challenging business environment for those companies that have a
lot of DC exposure.”