Sounds about like what I was expecting. Personally, I've long expected a reduction in the Japan beach market capacity - as hauling tour groups back and forth to SPN didn't sound like it would be the most efficient or rewarding use of assets long-term - and I suspect the currency headwind just exacerbated the economics. In Brazil, I will be interested to see if ATL-GRU stays at 14x weekly or if the second flight drops below daily, and similarly if BSB stays daily.
except those beach markets were and are still high revenue markets. DL was getting average fares from Japan to Hawaii higher than what AA was getting at the peak from MIA to deep S. America. Those were both very profitable markets. They are just much smaller. DL is not going to keep capacity in there in order to cut the price to levels comparable to what HA gets from HND (one of the lowest cost airlines from HNL to Japan).
The GUM and SPN routes are equally high yielding for the distance and DL and UA both have them.
A stronger dollar just means that you don't offer as many seats - but it also doesn't mean that the dollar will stay strong and when it does, DL and other carriers can add capacity back to beach markets just as AA will have to take capacity out of Brazil but they can put it back in a few years when it makes sense for Brazilians to come shop in the US again. Right now, the strong dollar means that a lot of products, even imported, are cheaper in Brazil than they are in the US.
Lets do some basic math.
$2.05 Billion is greater than then $650 Million.
and you still can't see that AA has had revenue declines because of the currency issues and AA has NOT replaced that revenue by increasing capacity where it can generate more revenue.
Bad hedges is not just about DL's fuel hedge losses vs. AA's currency hedges. It is about the effect of the changed oil and currency environments and how each company dealt with it.
as for the timing of the Venezuela currency losses vs. fuel hedge losses, if DL is thru with its hedge losses by the end of the 2nd quarter - which they say they mostly will be - but AA still is carrying the currency impairments - and yet DL is managing to increase profits now even with the fuel hedge losses, then the rate of DL's increases will accelerate in the 2nd half of the year.
DL said its market price for fuel for the quarter was $1.718 billion. It had $467 million in booked hedge losses but also had $86 M in refinery profits for a total in quarter actual cost of fuel of $2.099B. It also booked $589 M in MTM adjustments which are FUTURE hedges that are underwater at the moment and that DL will likely have to pay on. DL's total fuel expense for the quarter above market price including future hedges that are currently underwater is $970 million. DL has a chart with that information on its earnings release from yesterday.
Further, DL grew revenue by $472 million (5%) while decreasing costs by $306 million so the notion that DL can't increase revenue with lower costs is simply not accurate.
And AA could have increased revenue on a lower cost based but they have not done that in the first quarter. AA's revenues went down and so did their costs. Their costs appear to be going down more than their revenues which is a good thing but AA is still a smaller company in terms of revenue this year than it was at the same time last year.
DL took the opposite track.
It appears from what has been released that UA is somewhere in the middle.