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US Carriers Intl Route Profitability 3Q2007  
User currently offlineLAXintl From United States, joined May 2000, 8469 posts, RR: 11
Posted (6 months 3 weeks 2 days 2 hours ago) and read 1661 times:

Have run across regional profitability performance data for the US Major in 3Q07.

Some interesting stuff jumped out at me;
a) Extremely strong margins for CO on its International operations.
b) Meager DL margins to Europe and Latin America where it has placed so much importance on
c) Latin America might not be as big cash cow to AA as one assumes. Europe almost ecliples in total revenue, and has near double operating margins.
d) First year I've seen UA's Atlantic division eclipse Pacific in margins.


Atlantic
American
Operating Rev:$1.03B
Operating Cost:$881m
Profit/Loss:$152m
Operating Margin:+14.7
Load Factor:83.5%

Continental
Operating Rev:$896m
Operating Cost:$640m
Profit/Loss:$256m
Operating Margin:+28.5%
Load Factor:83.0%

Delta
Operating Rev:$1.22B
Operating Cost:$1.17B
Profit/Loss:$50m
Operating Margin:+4.1%
Load Factor:81.9%

Northwest
Operating Rev:$458m
Operating Cost:$351m
Profit/Loss:$106m
Operating Margin:+23.1%
Load Factor:88.6%

United
Operating Rev:$771m
Operating Cost:$618m
Profit/Loss:$152m
Operating Margin:+19.7
Load Factor:87.2%

US Airways
Operating Rev:$562m
Operating Cost:$504m
Profit/Loss:$59m
Operating Margin:+10.5
Load Factor:81.4%


Latin America
American
Operating Rev:$1.06B
Operating Cost:$968m
Profit/Loss:$88m
Operating Margin:+8.3%
Load Factor:80.6%

Continental
Operating Rev:$431m
Operating Cost:$314m
Profit/Loss:$118m
Operating Margin:+27.4%
Load Factor:82.4%

Delta
Operating Rev:$370m
Operating Cost:$357m
Profit/Loss:$14m
Operating Margin:+3.8%
Load Factor:80.4%

United
Operating Rev:$134m
Operating Cost:$126m
Profit/Loss:$8m
Operating Margin:+5.9%
Load Factor:80.1%

US Airways
Operating Rev:$146m
Operating Cost:$138m
Profit/Loss:$8m
Operating Margin:+5.4%
Load Factor:81.6%

Pacific
American
Operating Rev:$246m
Operating Cost:$224m
Profit/Loss:$22m
Operating Margin:+8.9%
Load Factor:84.7%

Continental
Operating Rev:$174m
Operating Cost:$143m
Profit/Loss:$32m
Operating Margin:+18.4%
Load Factor:85.7%

Delta
Operating Rev:$74m
Operating Cost:$66m
Profit/Loss:$7m
Operating Margin:+10.1%
Load Factor:82.2%

Northwest
Operating Rev:$769m
Operating Cost:701m
Profit/Loss:$68m
Operating Margin:+8.8%
Load Factor:89.1%

United
Operating Rev:$1.05B
Operating Cost:$876m
Profit/Loss:$177m
Operating Margin:+16.8%
Load Factor:82.7%

note: All the dollars are rounded to closest million.


From the desert to the sea, to all of Southern California
12 replies: All unread, jump to last
 
User currently offlineAddd From United States, joined May 2007, 234 posts, RR: 0
Reply 1, posted (6 months 3 weeks 2 days 2 hours ago) and read 1635 times:



Quoting LAXintl (Thread starter):
Have run across regional profitability performance data for the US Major in 3Q07.

Any chance you can disclose the source? One has to wonder if Operating Cost by "division" is consistent across all the airlines - at the end of the day, it is a question of total operating cost allocation to a specific route... and I have hard time believing there is anything even remotely resembling common methodology in that regard...

User currently offlineMMEPHX From United States, joined Mar 2004, 315 posts, RR: 0
Reply 2, posted (6 months 3 weeks 2 days 1 hour ago) and read 1540 times:



Quoting LAXintl (Thread starter):
Have run across regional profitability performance data for the US Major in 3Q07.

Interesting stuff. One other real surprise is NW Pacific 8.8% margin on 89.1% LF given their large market share and long term presence I was expecting to see something a bit better. NW Atlantic looks a lot better..no wonder NW/KL tout the benefits of that alliance!

User currently offlineBreaker1011 From United States, joined Nov 2007, 522 posts, RR: 1
Reply 3, posted (6 months 3 weeks 2 days 1 hour ago) and read 1535 times:

Interesting data and makes for a nice comparo, but I'd ask the same question as Addd. DL for instance - could margins truly be that low across the Atlantic, LA, and Pacific? Seems like the revenue numbers are directionally correct per carrier, and the LF's are verifiable, but the cost-piece is curious - would love to see the source data. Perhaps it's only DL that has some awkward cost-allocation method.

User currently offlineNorthwestEWR From United States, joined Oct 2004, 383 posts, RR: 4
Reply 4, posted (6 months 3 weeks 2 days ago) and read 1491 times:
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Very interesting! NW's load factors are fantastic, congratulations to them!
Looking at Delta's numbers though.... no wonder they're desperate.


ARJ 319 320 333 717 733 735 73G 738 739 742 752 753 762 772 CRJ CR9 ER3 ERJ FRJ J31 J41 D9S D94 D95 M81 M82 M88
User currently offlineLAXintl From United States, joined May 2000, 8469 posts, RR: 11
Reply 5, posted (6 months 3 weeks 2 days ago) and read 1485 times:

All data is off DOT form 41 reporting.

As I recall such regional reporting goes back many decades(atleast early 80s) and there are commonly accepted practices on how to allocate revenues and cost -- though I am sure carriers do get some leeway.

However, I dont believe DL does anything massively different then its peers as I have seen stronger performance measured against it peers in previous years.
Somewhat related during an employee Q&A in December VP of network Glen Hauenstein update everyone about DL's continued RASM disparity from the industry average with DL sitting at about 95% average stage lenght revenue

Quoting MMEPHX (Reply 2):
I was expecting to see something a bit better. NW

Its actually pretty good these days -- should have seen it a few years ago.

NWA traditionally has had yield disadvantages in the Pacific against United gaining significantly less premium revenue while having to deal with lots of the back of the bus crowds while operating near everything on large B747s.
The move to smaller equipment last few years has definately helped the carrier, reducing pressure to sell massive quantities of seats via consolidators - however they still do have a yield(and hence margin) disadvantage compared to UA.


From the desert to the sea, to all of Southern California
User currently offlineBreaker1011 From United States, joined Nov 2007, 522 posts, RR: 1
Reply 6, posted (6 months 3 weeks 2 days ago) and read 1442 times:



Quoting LAXintl (Reply 5):
However, I dont believe DL does anything massively different then its peers as I have seen stronger performance measured against it peers in previous years.
Somewhat related during an employee Q&A in December VP of network Glen Hauenstein update everyone about DL's continued RASM disparity from the industry average with DL sitting at about 95% average stage lenght revenue

Thanks Lax - great information! I'll bet some of DL's yeild disadvantage over this past summer over the Atlantic can be attributed to lots of routes using all-coach configurations (former domestic widebodies yet to be configured). Not sure how many in total there were, but that can put a dent in premium yeild. I took advantage of the all-coach F seat on DL's 764's twice in 3Q. Nothing like getting a domestic F seat across the pond for a T-class price! Shucks, I feel guilty now! haha

User currently offlineAddd From United States, joined May 2007, 234 posts, RR: 0
Reply 7, posted (6 months 3 weeks 2 days ago) and read 1423 times:



Quoting LAXintl (Reply 5):
All data is off DOT form 41 reporting.

As I recall such regional reporting goes back many decades(atleast early 80s) and there are commonly accepted practices on how to allocate revenues and cost -- though I am sure carriers do get some leeway.

Thanks - this is very helpful; I did not know there was a commonly accepted cost methodology...

User currently offlineLAXintl From United States, joined May 2000, 8469 posts, RR: 11
Reply 8, posted (6 months 2 weeks 5 days 6 hours ago) and read 1182 times:

Someone asked me if I could list carriers by their size in each market.

Per ASM (million's)

Atlantic
American - 6,842
Continental - 7,177
Delta - 10,434
Northwest - 3,730
United - 5,380
US Airways - 3,544

Latin America
American - 7,270
Continental - 3,142
Delta - 3,139
United - 1,138
US Airways - 866

Pacific
American - 1,695
Continental - 1,466
Delta - 593
Northwest - 5,868
United - 8,421


Per Markets Share of all US Airlines

Atlantic
American - 18.1%
Continental - 19.0%
Delta - 27.6%
Northwest - 9.9%
United - 14.2%
US Airways - 9.4%

Latin America
American - 40.9%
Continental - 17.7%
Delta - 17.7%
United - 6.4%
US Airways - 4.9%

Pacific
American - 8.9%
Continental - 7.6%
Delta - 2.8%
Northwest - 30.6%
United - 43.9%


From the desert to the sea, to all of Southern California
User currently offlinePanamair From United States, joined Oct 2001, 2901 posts, RR: 15
Reply 9, posted (6 months 2 weeks 11 hours ago) and read 873 times:
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There are some additional interesting tidbits that can be gathered from the posted DOT data when combined with the carriers' released Q3 2007 financials:

% of International Revenues as part of Total Operating Revenues:

CO 39.3%
AA 39.3%
NW 36.3%
UA 35.4%
DL 31.8%
US 23.3%

Domestic versus International Operating Profitability:

AA
Total Operating Income: $319m
International Operating Income: $262m (+11.2% margin)
Domesitc Operating income: $57m (+1.6% margin)

CO
Total Operating Income: $280m
International Operating Income: $406m (+27% margin)
Domestic Operating Income (Loss): $126m (-5.4% margin)

DL
Total Operating Income: $453m
International Operating income: $71m (+4.3% margin)
Domestic Operating Income: $382m (+10.7% margin)

NW
Total Operating Income: $459m
International Operating income: $174m (+14.2% margin)
Domestic Operating Income: $285m (+13.2% margin)

UA
Total Operating Income: $656m
International Operating income: $337m (+17.2% margin)
Domestic Operating Income: $319m (+8.9% margin)

US
Total Operating Income: $202m
International Operating income: $67m (+9.5% margin)
Domestic Operating Income: $135m (+5.8% margin)

User currently offlinePar13del From Bahamas, joined Dec 2005, 1044 posts, RR: 0
Reply 10, posted (6 months 2 weeks 10 hours ago) and read 831 times:

Numbers and numbers, so if I am reading Panamair numbers correctly, international operations of all US carriers accounts for less than 40% of total revenues, but their margins are higher so they are more in demand, is that some screwed up thinking or what? If US carriers can do anything about their domestic margins even by a small amount their profitability would go up, that is probably harder to do, so better to try the international market where the picking are easier.

It is easier for foreign carriers flying to the US than the reverse for this reason, US pax have multiple airports across the country to choose points of origin, hence more carriers can get a piece of the action, foreign lands usually limit their airport development so the choice of airports diminish, I look at it like the hub and spoke, the hubs are usually the foreign airports and the spokes are all the airports within the US that carriers can fly to, sure highlights the potential disadvantage the US is at by using air travel as one of their primary internal travel options.

User currently offlineLAXintl From United States, joined May 2000, 8469 posts, RR: 11
Reply 11, posted (6 months 1 week 6 days 5 hours ago) and read 619 times:

You are indeed correct. For all carriers except Delta, international operations have higher profitability margins then domestic ops.

So yes if the airlines could improve their domestic ops which represent about 60-70% of revenue, overall profitability would improve in even greater proportion.


From the desert to the sea, to all of Southern California
User currently offlineMasseyBrown From United States, joined Dec 2002, 3283 posts, RR: 4
Reply 12, posted (6 months 1 week 6 days 3 hours ago) and read 533 times:
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Quoting LAXintl (Reply 11):
You are indeed correct. For all carriers except Delta, international operations have higher profitability margins then domestic ops.

There is lots of perfectly legal methods for the airlines to play with these numbers in rather huge ways. The cost allocation system is not at all cut and dried.

Looking at the numbers, if the allocation for Delta were truly accurate, Hauenstein would be fired and the shift to international flying would be halted in its tracks. Instead, DL is proceeding to cut more supposedly-profitable domestic flying and shift it to international. Same with CO; the numbers say there is no reason for them to expand domestic flying and yet that's what they have been doing for the past four or five years.

Take these numbers as a crude weather vane not an anemometer.


High fructose corn syrup is the root of all evil.
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