Q3 Rasm-casm Analysis

[USA320Pilot]

Network versus LCC Airline September 30, 2003 CASM - RASM net difference

Network Airlines (CASM minus RASM or net difference)

US Airways: 10.98 - 9.41 = (-$1.57)
Delta: 10.21 - 9.28 = (-93 cents)
United: 9.67 - 8.83 = (-84 cents)
American: 9.49 - 8.84 = (-65 cents)
Northwest: 9.34 - 9.07 = (-27 cents)
Continental: 9.01 - 8.94 = (-7 cents)

LCC’s (RASM minus CASM or net difference)

JetBlue: 7.14 - 5.92 = +$1.22
Southwest: 8.26 - 7.51 = +75 cents
AirTran: 8.83 - 8.11 = +72 cents

Source: Company Reports

Regards,

Chip

 

[USFlyer]

Hmm, so US's much bragged about "revenue premium" really isn't all that helpful when looking at the numbers this way.

 

[cavalier]

Yea Chip...we know, time to take another beating over the head.

Picture is worth a thousand words. . . .Do da Do da

 

[USA320Pilot]

Reports inside of ALPA indicate Delta Air Lines will obtain pilot pay, benefit, and work rule concessions, which will lower the company's unit costs.

The recent resignation of Leo Mullin and appointment of Jerry Grinstein as chief executive is expected to expedite a labor concession.

See Story

Then US Airways and United Airlines will have the worst CASM - RASM net difference in the industry even though both companies had an in-court restructuring. I'm not trying to beat a dead horse, but this is the major reason the business partners will likely consolidate to obtain economies of scale to reduce unit costs after US Airways stabilizes its core business with the Transformation Plan and United proves it can emerge from bankruptcy, which is still uncertain for both airlines.

Regards,

Chip

 

[phillyguy]

Chip

Where do expect U to end up this quarter from a P/L point of view?

 

[AAviator]

Chip, its cents per, not dollars.

 

[cavalier]

Chip, your icons are appropriate anyway. The sky is falling, the sky is falling! lol

 

[BoeingBoy]

Oh Chip, what are we going to do with you? Either inadvertently or to prove a point, you've compared apples to oranges.

You say US Airways' RASM is 9.41 cents. See the asterick beside that item? If you go to the bottom of the tables there is this footnote "* Denotes scheduled service only (excludes charter service)"

You say US Airways' CASM is 10.98 cents. If you'll read the rest of that line it says "excluding US Airways Express capacity purchases ("mainline CASM")"

There is a RASM line that also includes "excluding US Airways Express capacity purchases ("mainline CASM"). Using that figure paints a different picture, though. This figure for RASM is 10.56 cents.

So, an apples to apples comparison would be:

US Airways: 10.98 - 10.56 = (0.42 cents)

I also thought it was cute that you subtracted 9.41 cents from 10.98 cents and got one dollar and 57 cents for the answer. Shouldn't that be 1.57 cents.

I haven't bothered to check the other airlines' numberes so I'll just say this. All of them are 2 decimal places off.

Jim

 

[USA320Pilot]

Phillyguy:

Phillyguy asked: 'Where do expect U to end up this quarter from a P/L point of view?"

Chip answers: Phillyguy, the company will see its CASM drop as more restructuring plan cuts are implemented and the RASM will increase due to more RJ deployment and code share revenue. In fact, 2004 will see further RASM improvement because the four alliances will have greater market breath, MDA up and running, over 100 RJs added to the network next year, and the Transformation Plan will be implemented.

However, the fourth quarter will be weaker than the third quarter. Provided the weather remains favorable through December, the company will maintain sufficient liquidity, but the company made a $62 million one-time payment to the pilots for the DC Plan. Also noteworthy, we could see one-time gains with the sale of excess gates/facilities to Virgin USA, therefore, a specific net loss or gain is difficult to predict.

The ATSB loan guarantee application does not predict a profit until 2005, thus I expect the company to continue to lose money until Q2 2005.

Regards,

Chip

 

[USA320Pilot]

BoeingBoy:

My numbers for US Airways and the other airlines are correct. Going forward I expect US Airways CASM to drop with items such as savings from the PIT hub negotiations, United facility integration, severance payments moderating, etc. and RASM to improve with MDA, 100+ 2004 RJs added, and the four alliances.

However, the numbers were for the end of Q3 2003 are accurate. Thanks for your input.

Regards,

Chip

 

[ual06]

Network versus LCC Airline September 30, 2003 CASM - RASM net difference

Network Airlines (CASM minus RASM or net difference)

US Airways: 10.98 - 9.41 = (-$1.57)


Source: Company Reports

Regards,

Chip

Duh..... Say again.

Do you mean that Cost per Available Seat Mile (CASM) at US Airways is $10.98 and that Revenue per
Available Seat Mile (RASM) at US Airways is $9.41 ??????????? ( Source: Company Reports )

Something here does not seem right.

 

[BoeingBoy]

Chip,

Yes the numbers are accurate. Unfortunately they are numbers for two different things. Your CASM figure is for mainline, while your RASM is for system-wide.

Go back and take another look at the 3rd quarter 2003 report. I had it up while I was typing my response above. The items I put in quotes were cut & paste directly from that report.

Jim

 

[michael707767]

Chip,
every time I have read a DAL report, it says that their CASM numbers include the DCI carriers. Do you numbers break out the mainline vs DAL as a whole?

Also, my sources seem to indicate that neither the company nor the union is very hopeful a deal will be made with enough cuts for the company to justify a contract extension, and therefore they will be moving on to full Sec. 6 negotiations in the fall.
Michael

 

[Bear96]

Then US Airways and United Airlines will have the worst CASM - RASM net difference in the industry even though both companies had an in-court restructuring. I'm not trying to beat a dead horse, but this is the major reason the business partners will likely consolidate to obtain economies of scale to reduce unit costs after US Airways stabilizes its core business with the Transformation Plan and United proves it can emerge from bankruptcy, which is still uncertain for both airlines.

Seems to me this would be a good reason to NOT "consolidate" (whatever that means exactly; but it does seem to be this week's buzzword, so we'll go with it).

Will UA's BOD and stockholders vote to consolidate with the only airline worse off than UA is?

Will U's BOD and stockholders vote to consolidate with the airline that is second-to-worst only to U?

What sense does it make for one company in terrible shape to consolidate with another? If I were a stockholder and the Board voted to go ahead with something like this I would be looking for blood for abandoning their fiduciary responsibility.


Now having said that, as I have said before nothing would surprise me in this business so I wouldn't be all that surprised if UA and U somehow "consolidate" some day. But it seems like the combined entity would be even more of a disaster than what we have now.

 

[BoeingBoy]

Well, back in '88-'89 US Air merged 3 money-making airlines and look what happened. We've only made money a couple of years since. Maybe CCY figures if they do the opposite, the results will be different.

Jim