Analyst Predicts 'huge' Airline Turnaround

[BoeingBoy]

Analyst Predicts 'Huge' 2006 Airline Turnaround
Aviation Week & Space Technology
09/26/2005, page 15

Edited by Frances Fiorino

Flying in the face of the prevailing gloomy view of the U.S. airline industry, consultant Edmund S. Greenslet is predicting a huge 2006 turnaround for most of the nine largest U.S. airlines. He reaches into history to explain how airlines have always been slow to respond to high fuel costs, the real culprit of 2005. In his monthly report, The Airline Monitor, Greenslet points to recovering yields and sharp cost-cutting as setting the stage for change. "The real answer to higher fuel costs is higher yield and revenue, and that is beginning to happen," he wrote. He projects a 2.2% rise in yield next year and a similar decline in unit costs, with a slight increase in load factor. The forecast model predicts an aggregate operating profit of $2.9 billion for all nine, with Delta Air Lines and US Airways still in the losing column. Total net income will suffer from restructuring charges related to Chapter 11. The basic trends in industry fundamentals have turned positive, he says. "The darkest days are, we believe, over and the sun is rising."

Jim

 

[PITbull]

LOL...I want what he's smok'in. B)

 

[BoeingBoy]

In the spirit of fair and balanced....

August Unit Revenue Rises 7%; Atlantic Is Strongest Region
09/23/2005 09:59:17 AM
By Steven Lott

U.S. airline industry unit revenue in August jumped 7%, according to the latest Air Transport Association data, thanks to a yield increase during the month.

The RASM increase represents data from the eight major network carriers. Total mainline passengers fell 0.7% and traffic rose 2% on a slight 0.5% capacity increase. Yield improved 5.5% while loads increased 1.2 points to 82.4%. On the domestic front, mainline unit revenue increased 8.1% as yield improved 5.8% and load factor increased 1.7 points to 82.1%. Domestic mainline revenue increased 4.8% on a 3.1% decrease in capacity.

Outside the U.S., "the industry's revenue performance continued to be strong," said Merrill Lynch analyst Michael Linenberg. Atlantic passenger RASM led all regions, rising 7%, driven by a 7.7% increase in yield offset slightly by a 0.6-point drop in load factor. "We believe the successful attempts by the carriers at raising fares are helping to mitigate some of the sting of high fuel prices," he said. "We could see this positive revenue trend continue into the fall" as several airlines plan to cut capacity.

JP Morgan analyst Jamie Baker was "modestly" disappointed with the August numbers. He notes that August mainline system revenue fell 6.6% sequentially from July's revenue, which represents the sharpest sequential drop in at least 10 years. "While one data point does not a trend make, August may represent the first tangible evidence of consumer resistance to rapidly rising fares," Baker said.

Aviation Week, a division of The McGraw-Hill Companies.