Airlines See Uplifting Sign

USA320Pilot

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May 18, 2003
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Airlines See Uplifting Sign

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Separately, in a research report Lehman Brothers made the following comments:

ATA revenue for May last night a touch lower than our estimates, but essentially in line. We expect strong RASM comparisons to continue through the summer.

* The revenue environment remains strong amid stable economic conditions and lower capacity growth than last year. Capacity plans are creeping upward in the domestic entity, but we expect growth will remain well below year ago levels, driving strength in RASM comparisons through the summer. July should be the toughest month (flattish) while August and September should see meaningful year non year gains.

* Domestic RASM increased 5.7% vs. our 6-7% estimate and system RASM improved 5.2% versus our +6-7% forecast. International strength continued in May with positive comps in all regions except the Pacific. The Atlantic (+7.0%) and Latin (+ 5.0%) entities realized solid gains year over year. RASM in the Pacific increased only 0.7%, which is somewhat underwhelming given recent performance in the entity; Northwest and United are the most levered to Pacific
performance.

* Preliminary ATA June RASM forecast +2-3% for domestic and system, slightly reduced from our previous +3-4% for both regions to reflect slightly lower than anticipated May results.

* Next data point is CAL's June RASM, which should come out first few days of July. CAL's consolidated RASM increased by 8.5-9.5% in May, and we expect the carrier will continue to outperform (to some extent on easier comps) in June; we are forecasting a 4.5-5.5% consolidated RASM improvement for Continental in June.

Regards,

USA320Pilot
 
Current energy prices places America West at risk of another default and is part of the reason the company's pilots want the corporate combination to proceed. America West ALPA MEC chairman J.R. Baker told the Pittsburgh Tribune-Review today that "We want to get the merger done just like management does.â€￾

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The new US Airways must have the $600 million in additional cost cuts and revenue synergies to survive today more than ever, thus current energy prices will increase the motivation of the parties to complete the deal, otherwise both business enterprises would be placed at greater risk.

Senior management at both companies, ALPA E&FA, and ALPA's financial advisors have briefed both MEC's on the importance of the merger to protect pilot interests at both carrier's, which is clearly understood by the union leadership.

Regards,

USA320Pilot
 
Well be prepared for more layoffs and another round of concessions before Sept 30th.
 
Jamie Baker is quoted as making one statement that surprised me considering his stature:

"Baker estimates that the recent string of industry fare hikes and resulting RASM gains ought to offset about a $6 increase in the price of a barrel of oil."

He seems to be indicating that fare increases are responsible for the higher RASM, but fare hikes should show up in both yield and RASM, given equal or higher load factors. ATA data indicates that the only areas where yield is up in May is the Atlantic. Considering that the fare increases didn't kick in till March, domestic yield is down from both March & April, Latin yield is down from April and basically the same as March & January, and Pacific yield is only slightly up from March but down a good bit from January and April.

It seems pretty clear that the RASM increase is being driven by load factor increases, not yield increases (which would result from fare increases). This also matches CAL's statements.

What the fare hikes have done is slow/stop the yield erosion, which has resulted in the increasing load factor being translated into higher RASM. Assuming that a specific airline is seeing the increasing load factor.....

Jim

oh, the ATA yield data is here
 
Sorta on topic, I see that US is resuming the quarterly conference call. The 2Q05 results will be discussed on June 27 at 11:00 am. Accessible through US Airways.com and the "Investor Relations" then "Presentations" links.

Jim
 
US airlines surprise with revenue strength

WASHINGTON (ATWOnline.com) - US mainline system revenue per ASM for the eight largest US passenger airlines (excluding Southwest) rose 5.2% in May compared to the year-ago period on a 2.4% increase in capacity, according to JP Morgan, which cited data from the Air Transport Assn.Yield was up 0.6%--the first year-on-year increase since July 2004--and revenues climbed 7.7%. JP Morgan's Jamie Baker described the RASM rise as "stronger than expected."

Domestic RASM improved 5.7% on a 4.6% increase in RPMs and a 0.8% decline in ASMs. Yield was virtually flat at 0.1% and revenues rose 4.8%. Atlantic RASM climbed 7% as RPMs grew 10.3%, yield rose 3% and ASMs increased only 6.2%. As a result, revenues jumped 13.6% compared to May 2004.

In the Pacific region, capacity outgrew traffic 14.6% to 11.2% with the result that a 3.8% rise in yield turned into a 0.7% gain in RASM. The revenue increase was 15.4%. On Latin America services, a 2.1% fall in yield showed up as a 5% improvement in RASM because RPMs climbed 17.7% against a 9.8% rise in ASMs. The result was that revenues jumped 15.2%.

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Regards,

USA320Pilot
 
As I hinted in a prior post, these averages are well and good - they give an idea how the industry is doing (or in this case, the mainline portion of the 8 largest carriers excluding WN). But assuming results for a specific airline - say US Airways - from an average like that in both the articles in this thread is fraught with risk.

For those interested, first a quick rule of thumb - you can get a close approximation of the change in RASM by adding the change in load factor to the change in yield. Hence my earlier comment that a RASM increase without a corresponding yield increase is attritible to load factor.

Unfortunately, what this rule of thumb lacks is timeliness - by the time you have a specific airlines change in yield you usually also have their RASM data (CAL being the exception due to their monthly RASM guidance).

However, using the US Airways change in mainline load factor in May - up 0.4% - one can say that the yield would have to be up about 4.8% to equal the average RASM increase of 5.2% reported by the ATA. Since a large percentage of our RPM's and ASM's are domestic (ATA says yield increased only 0.1%) and Latin America (ATA says yield down 2.1%), it's likely we saw less than half the average RASM increase in the report. It's distinctly possible that we didn't see any RASM increase at all.

Unless, of course, our yields were up significantly more than the ATA average for these areas. Maybe we outperformed the average in yield improvement as much as we underperformed it in load factor improvement.

Jim
 
First:

MODERATORS - you might as well fold this thread into the current discussion.

Now, there's this:

Aviation Daily

May Unit Revenue Growth Beats Estimates, Outlook Also Bright

06/22/2005 09:16:56 AM
By Adrian Schofield

Financial analysts were impressed by the May revenue performance of the major U.S. carriers, which exceeded most expectations, and they predict strong unit revenue growth will continue through the summer.

The analyst reports were based on Air Transport Association data for May, covering eight major carriers. ATA said mainline unit revenue rose 5.2%, with mainline revenue up 7.7%, traffic 7% and capacity 2.4%. Yield rose 0.6%, and load factor grew 3.5 percentage points to 79.5%.

In the domestic market, unit revenue was up 5.7%, outpacing the 4.6% increase in international unit revenue growth. This was the first time since September 2003 that domestic unit revenue growth outperformed international, said Michael Linenberg of Merrill Lynch. Domestic yield rose just 0.1% (DAILY, June 21), marking the first increase in this statistic since April 2004, he said. Domestic load factor grew 4.1 points to 79.2%, and revenue was up 4.8%.

The May systemwide unit revenue growth is a "nice improvement" from the April increase of 1.3%, Linenberg said. The May gain of 5.2% was higher than his prediction of 2%-3%, although he noted that "positive revenue comments" made by airlines recently signal a larger growth.

Linenberg thinks American, America West, Continental and United probably exceeded the industry average for unit revenue growth in May, while Delta, Northwest and US Airways "likely underperformed" the industry average. He cautioned that the combined $600 million revenue increase for May will be offset by an estimated $550 million growth in fuel prices.

JP Morgan's Jamie Baker also said the unit revenue growth was "nicely ahead" of his 3%-4% prediction and is "directionally consistent" with expectations. He said America West and Alaska Airlines led the growth, followed by Continental, United, American, Northwest and Delta, with only US Airways seeing a decline.

Gary Chase of Lehman Brothers said unit revenue growth was a "touch lower" than his estimate of 6%-7% growth. ATA's preliminary June forecast of 2%-3% unit revenue growth is also lower than his prediction of a 3%-4% increase. Chase said July will be "flattish," but August and September should see meaningful increases. Lower capacity growth than last year is helping drive unit revenue improvement, Chase said.

Baker agreed that the positive trends influencing the airlines should "sustain sector performance" through the summer months. Linenberg said many carriers are reporting strong bookings for June, and the unit revenue growth trend should continue. He estimates that system unit revenue will increase 4%-5% in June.

Aviation Week, a division of The McGraw-Hill Companies

Jim
 
USA320Pilot said:
Current energy prices places America West at risk of another default and is part of the reason the company's pilots want the corporate combination to proceed. America West ALPA MEC chairman J.R. Baker told the Pittsburgh Tribune-Review today that "We want to get the merger done just like management does.â€￾

See Story

Spin, Spin, Spin.

1. A risk of defaulting on what? Certainly not the ATSB loan covenants. As of 1Q05, the company reported over $250mil of unrestricted cash, and the ATSB-backed loan requires that they have $100mil unrestricted cash.

2. AWA said they expect to build cash in the current quarter.

3. You have never proven that AWA defaulted previously. You reported that ALPA told you this, yet there has never been a renegotiation of their loans to deal with such an occurance. Provide some facts to back up this assertion (You could not the last time I challenged you).

(Side Note: Why do we have to continually review your erroneous version of history?)

4. The article you linked contains no such information.

Don't let the facts stand in your way...
 
This topic was about industry revenue and has been hijacked by the normal suspects.

Analyst's believe America West could be at risk of default this winter and have made their sentiment publicly known. In regard to America West comments to ALPA, all I can tell you is that senior management believes the Arizona-based airline needs the merger to survive.

this has nothing to do with spin, just the facts.

Meanwhile, here is another column on industry revenue:

AMR Sees Unit Revenue Growth

"American Airlines expects a nice uptick in unit revenue in the second quarter."

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In regard to US Airways' revenue, the East Coast is hyper-competitive with Song, JetBlue, AirTran, Independence Air, and Southwest all offering deep discounted fares in the heart of the Arlington-based airlines market. For example, passengers have been able to fly from LGA to FLL for as low as $55 one-way, which is less expensive than a moderately priced pair of shoes.

Regards,

USA320Pilot
 
USA320Pilot said:
Meanwhile, here is another column on industry revenue:

AMR Sees Unit Revenue Growth

"American Airlines expects a nice uptick in unit revenue in the second quarter."

See Story
[post="278391"][/post]​

If you want to see everything AMR had to say, go to the source here. It's really quite interesting. Just click on the top SEC filing (6/22/05 and 16K file size) - at least it's the top one now.

Jim

ps - Who was that "usual suspect" that first mentioned AWA, "second" defaults, etc, anyway? How dare they "highjack" this thread......
 
More telling than fuel costs for US IMHO will be the disposition of Independence Air, which is finding out the hard way that 'Freedom ain't all it's cracked up to be.' If DH dies shortly after the summer season, then all East Coast players will experience significant revenue improvements (despite a slight drop in traffic). If DH survives, and especially if it goes back into absent-minded hyper-aggressive discounting mode after Labor Day, US will bleed like a hemophiliac yet again.