WASHINGTON (Reuters) - Air travel is expected to grow by 3 percent for U.S. domestic flights in 2011, a moderately stronger rate of growth for the industry than last year, according to government estimates.
The Federal Aviation Administration FAA.L said on Tuesday ahead of its annual industry forecast conference that U.S. carriers flew 635 million passengers on domestic flights in 2010, which was up less than 1 percent over the previous year.
Expected growth for U.S. travel this year is tied to overall economic health and resurgent business travel, a premium source of revenue for airlines.
U.S. airlines are also expected to see 7 percent gains in overseas travel, especially to Latin America and Asia. U.S. airlines carried 77 million passengers last year on overseas flights, the FAA said.
Although FAA forecasts cover the government's October-September fiscal year period, it provides a closely watched indicator of annual industry trends.
Airline profits topped $4 billion in 2010 on stronger demand vying for fewer flights at higher fares. Rising fuel prices this year have prompted some concern within the industry about future earnings.
Analyst Gary Chase, however, said airlines consistently adapt to higher fuel costs.
"As the market gets comfortable with the industry's ability to cope with recent fuel increases, we expect shares across the sector to be stronger," Chase of Barclays Capital said in a research note to clients this week.
The Arca Airline Index .XAL has dropped from just over $50 per share to $46.23 over the past three months, mainly on fuel cost concerns.
The International Air Transport Association expects strong growth in China to push global travel up 32 percent by 2014 to 3.3 billion passengers, the group said on Monday. (Reporting by John Crawley, editing by Dave Zimmerman)