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CO, WN Report LF Declines For June  
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Posted (6 years 3 months 3 weeks 5 days 3 hours ago) and read 3466 times:

CO and WN are the first two carriers that have reported traffic for June but both are reporting load factor declines. WN’s LF (all domestic was down almost 4%) while CO was down in every region except for Latin America.

http://biz.yahoo.com/prnews/080701/latu555.html?.v=4

http://biz.yahoo.com/prnews/080702/law011.html?.v=101

These numbers indicate the challenges facing the industry in matching capacity to demand as fares rise to cover higher fuel prices. June is not the peakest of the summer but LFs should not be slipping during the summer unless fares are too high for people to afford to travel.

WN’s capacity was up slightly less than 6%; CO’s was up 2.5%. Neither airline was able to fill the additional capacity they put into the market.

It makes it all the more likely that more capacity will have to come if fuel doesn’t come down soon.

CO’s RASM growth in June was weaker than in recent months; CO is one of the few US airlines that reports RASM on a monthly basis and is therefore viewed as a bellweather of how the rest of the industry will do.

37 replies: All unread, showing first 25:
 
User currently offlineYellowtail From United States of America, joined Jun 2005, 6223 posts, RR: 2
Reply 1, posted (6 years 3 months 3 weeks 5 days 2 hours ago) and read 3396 times:



Quoting WorldTraveler (Thread starter):
CO was down in every region except for Latin America

Along with good yields to LatAm too...once again the region will help to shore up CO balance sheets....ditto for AA.



When in doubt, hold on to your altitude. No-one has ever collided with the sky.
User currently offlineMaverickM11 From United States of America, joined Apr 2000, 17672 posts, RR: 46
Reply 2, posted (6 years 3 months 3 weeks 5 days 2 hours ago) and read 3394 times:

For the record, DEN and SFO each represent a roughly a quarter of WN's YOY seat growth in the 2nd quarter.


E pur si muove -Galileo
User currently offlineSxf24 From United States of America, joined Aug 2007, 1262 posts, RR: 0
Reply 3, posted (6 years 3 months 3 weeks 5 days 2 hours ago) and read 3317 times:



Quoting Yellowtail (Reply 1):
Along with good yields to LatAm too...once again the region will help to shore up CO balance sheets....ditto for AA.

What a silly statement.

Performance in a region has nothing directly to do with an airline's Balance Sheet.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 4, posted (6 years 3 months 3 weeks 5 days 1 hour ago) and read 3185 times:



Quoting MaverickM11 (Reply 2):
For the record, DEN and SFO each represent a roughly a quarter of WN's YOY seat growth in the 2nd quarter.

and that shift to DEN will accelerate going into the fall based on WN's schedules.

Quoting Sxf24 (Reply 3):
Quoting Yellowtail (Reply 1):
Along with good yields to LatAm too...once again the region will help to shore up CO balance sheets....ditto for AA.

What a silly statement.

Performance in a region has nothing directly to do with an airline's Balance Sheet.

A good solid region helps the finances of the entire company and thus helps limit the bleeding of cash that is happening throughout the industry right now – and thus deteriorates the balance sheet.

What is silly is to think that AA and CO are the only carriers to benefit from strength in Latin America – or that other airlines are not seeing benefits in other regions of their system.

BTW, Wall Street likes WN’s traffic numbers which indicate that it is growing overall traffic but just not as fast as it is adding capacity. WN obviously has the financial strength of its hedges to subsidize capacity additions.


User currently offlineSxf24 From United States of America, joined Aug 2007, 1262 posts, RR: 0
Reply 5, posted (6 years 3 months 3 weeks 5 days 1 hour ago) and read 3177 times:



Quoting WorldTraveler (Reply 4):
A good solid region helps the finances of the entire company and thus helps limit the bleeding of cash that is happening throughout the industry right now – and thus deteriorates the balance sheet.

Since all airlines have horrible Balance Sheets to begin with, I think the assumption that a single strong region can make a difference is silly.


User currently offlineN471WN From United States of America, joined Dec 2003, 1564 posts, RR: 2
Reply 6, posted (6 years 3 months 3 weeks 5 days ago) and read 3063 times:
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Bottom line is that WN has to be disappointed in those June numbers. Every one of the 10 flights I was on in June out of OAK were packed so it must be the ramp up of Denver and SFO service and yes I know I only have a small sample so do not point it out to me.

User currently offlineFrmrCAPCADET From United States of America, joined May 2008, 1731 posts, RR: 1
Reply 7, posted (6 years 3 months 3 weeks 4 days 23 hours ago) and read 3048 times:

For a variety of strategic reasons I would bet that no airline makes profits on ALL of its routes. For the company to make an all over profit, its profitable routes need to outproduce its unprofitable ones. And of course it needs to cull as many unprofitable routes as it can, consistent with its (successful?) strategy. $200 a barrel oil will require rethinking strategy. This will take time. And the big question is which airlines have access to enough cash to have the time to do this.


Buffet: the airline business...has eaten up capital...like..no other (business)
User currently offlineYellowtail From United States of America, joined Jun 2005, 6223 posts, RR: 2
Reply 8, posted (6 years 3 months 3 weeks 4 days 20 hours ago) and read 2915 times:



Quoting Sxf24 (Reply 5):
Since all airlines have horrible Balance Sheets to begin with, I think the assumption that a single strong region can make a difference is silly.

I said shore up....not swing them to a profit.....a good region can help to offset the bleeding elsewhere.....after 9/11 LatAm helped AA and CO immensely.

Ok...you add DL but their success in Latam has been spotty. Nevertheless the successes have been really good...

My point was that LatAm is usually a good consistent performer.



When in doubt, hold on to your altitude. No-one has ever collided with the sky.
User currently offlinePlanesNTrains From United States of America, joined Feb 2005, 5634 posts, RR: 29
Reply 9, posted (6 years 3 months 3 weeks 4 days 16 hours ago) and read 2768 times:



Quoting Sxf24 (Reply 5):
Since all airlines have horrible Balance Sheets to begin with, I think the assumption that a single strong region can make a difference is silly.

Every bit helps. What's wrong with that statement????

-Dave



Next Trip: SEA-ABQ-SEA on Alaska
User currently offlineDL Widget Head From United States of America, joined Apr 2000, 2100 posts, RR: 5
Reply 10, posted (6 years 3 months 3 weeks 4 days 16 hours ago) and read 2744 times:



Quoting Yellowtail (Reply 8):
Ok...you add DL but their success in Latam has been spotty. Nevertheless the successes have been really good...

On the contrary, DL's "Latam" operations have been on the whole very successful with only the odd route here and there being "spotty". Even the mighty AA has had some "spotty" ops in the region hence, their announcement to withdraw from BAQ recently. Every airline has their poor performers no matter the region. New routes are started with the highest hopes but sometimes they don't always pan out as one anticipated


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 11, posted (6 years 3 months 3 weeks 4 days 15 hours ago) and read 2711 times:

Add AA to the list of carriers showing LF declines... like CO, AA's LF declined in every region except for Latin America.

User currently offlinePSU.DTW.SCE From United States of America, joined Jan 2002, 7661 posts, RR: 27
Reply 12, posted (6 years 3 months 3 weeks 4 days 4 hours ago) and read 2544 times:

A couple random thoughts:

Comparing June 2007 to June 2008, last year the airlines were arguably somewhat conservative at ramping up capacity during the brief industry upswing. When airlines were planning their Summer 2008, schedules in late 2007, there were few indications that the industry, economy, and country would be in the situation that we are today. Airlines had planned on increasing capacity in Summer 2008.

Now, that the industry is in a downturn again, for the most part the capacity cuts aren't coming until after the summer schedule.

We appear to be in the lag right now where airlines are running a schedule under which they had planned for things to be much different. Hopefully, by the fall, things will get back into balance.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 13, posted (6 years 3 months 3 weeks 4 days 2 hours ago) and read 2479 times:



Quoting PSU.DTW.SCE (Reply 12):
We appear to be in the lag right now where airlines are running a schedule under which they had planned for things to be much different. Hopefully, by the fall, things will get back into balance.

Given that analysts are saying that, given $140/bbl oil, 20% of capacity needs to come out of the market and oil prices keep rising while no carrier has yet taken 20% out and no large carriers have failed, balance is a long ways away. Even if oil drops quickly towards the end of the year, balance sheets have been damaged and airlines need a good solid year or two to repair the damage.

The trend of decreasing LFs continued this a.m. with AS’ traffic numbers…. There is still too much capacity in the system.

We are now in a fight for survival and there is no choice but for a few carriers to fail or for the remaining ones to cut very deeply in order for the industry to survive current fuel prices.


User currently offlineAirzim From Zimbabwe, joined Jun 2001, 1215 posts, RR: 1
Reply 14, posted (6 years 3 months 3 weeks 4 days 1 hour ago) and read 2442 times:

Load Factor analysis proves nothing.

RASM analysis is the real indicator. Based on what CO is reporting, it appears as they cut capacity they are still improving RASM's. I think 4-5% YOY increase in this environment is fantastic. Certainly trending in the right direction.

Unlike previous bonehead pricing decision, (a la Simplifares) rational fare fencing (e.g., Sat night stays, stratified pricing, advanced purchase requirements) are all going back into the fare structure and improving yields. This naturally will hurt overall demand which contributes to lower load factors, while at the same time driving up RASM's which is the only meaningful gauge of relative performance.

I said it two years ago when all the airlines were following Delta and US Airways down the revenue downward spiral path, the only proven pricing model that works, is a multi tiered stratified pricing structure that drives consumers to fare products based on propensity to purchase. Consumers may hate it, but who cares.

And the proof is in the Southwest pudding. That is the model they have used successfully for years.


User currently offlineCloudy From , joined Dec 1969, posts, RR:
Reply 15, posted (6 years 3 months 3 weeks 3 days 23 hours ago) and read 2383 times:



Quoting N471WN (Reply 6):
Every one of the 10 flights I was on in June out of OAK were packed so it must be the ramp up of Denver and SFO service and yes I know I only have a small sample so do not point it out to me.

Not only do you have a small sample, but you also don't account for the fact that you are more likely to be on a flight that is full, simply because the full flight carries more people. This is why load factors always appear higher than they really are. Above 80% load factor all the flights at desirable times are full, as a general rule.


User currently offlineUnited1 From United States of America, joined Oct 2003, 6019 posts, RR: 9
Reply 16, posted (6 years 3 months 3 weeks 3 days 23 hours ago) and read 2351 times:

Load factors are going to fall as the carriers continue to raise fares, however they should get a bump this fall as capacity starts to come out. DL is continuing that downward trend this afternoon however they did get a nice bump form their Latin America operations. System loads are down by .5% to 85.4%

Mainline Results
Domestic 88.1% down .5%
Latin America 81.9% up 6.3%
Pacific 81.4% down 6.2%
Atlantic 83.9% down 2.1%



Semper Fi - PowerPoint makes us stupid.
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 17, posted (6 years 3 months 3 weeks 3 days 19 hours ago) and read 2263 times:

UA posted LF decreases in every entity despite capacity reductions in Latin America.

DL has posted the smallest LF declines of any network carrier - enough for them to accurately portray their traffic results as FLAT.

They also have nearly doubled their transpac capacity and still saw loads fall less than 10%.

I can't wait to see their traffic results for June 09.... transpac traffic up X00%.


User currently offlineAirzim From Zimbabwe, joined Jun 2001, 1215 posts, RR: 1
Reply 18, posted (6 years 3 months 3 weeks 3 days 15 hours ago) and read 2180 times:



Quoting WorldTraveler (Reply 17):
UA posted LF decreases in every entity despite capacity reductions in Latin America.

DL has posted the smallest LF declines of any network carrier - enough for them to accurately portray their traffic results as FLAT.

They also have nearly doubled their transpac capacity and still saw loads fall less than 10%.

I can't wait to see their traffic results for June 09.... transpac traffic up X00%.

What demonstrates exactly nothing, yet again. You're attempting to allude to something that isn't there. Par for your course.

Didn't anyone that cheerleads for Delta take economics in college?


User currently offlinePlanesNTrains From United States of America, joined Feb 2005, 5634 posts, RR: 29
Reply 19, posted (6 years 3 months 3 weeks 3 days 15 hours ago) and read 2180 times:



Quoting WorldTraveler (Reply 17):
DL has posted the smallest LF declines of any network carrier - enough for them to accurately portray their traffic results as FLAT.

Just curious how RASM is for them relative their peers. Are they buying high load factors, or benefiting from their overall market repositioning? I don't have an opinion either way.

-Dave



Next Trip: SEA-ABQ-SEA on Alaska
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 20, posted (6 years 3 months 3 weeks 3 days 15 hours ago) and read 2168 times:

any who knows anything about airline economics knows that LF is very closely correlated to RASM performance. The network carriers are operating with fairly stable yields and have been for several years; they are pricing their product fairly consistently. Thus, if the LF part of the RASM equation suffers, RASM WILL fall. If you doubt that DL's RASM growth will look strong relative to the rest of the network carriers, just wait another 3 weeks or so when 2nd quarter financials will be released. I can assure you that AA, CO, and UA's RASM performance will be weaker than in the past and DL's will be stronger than these carriers.

User currently offlineUnited1 From United States of America, joined Oct 2003, 6019 posts, RR: 9
Reply 21, posted (6 years 3 months 3 weeks 3 days 14 hours ago) and read 2121 times:



Quoting PlanesNTrains (Reply 19):
Just curious how RASM is for them relative their peers. Are they buying high load factors, or benefiting from their overall market repositioning? I don't have an opinion either way.

Based upon figures that NW released at the Merrill Lynch Conference...

DLs RASM is at 11.1c just above industry average, UA has the highest at 13.0c and WN the lowest at 7.3c.

Mainline Load factors among the majors....DL only released system of 85.9 which includes the regionals so I'm not so sure where to put them in this chart.

UA 86.5
AA 85.5
CO 84.1
AS 79.5
WN 78.2



Semper Fi - PowerPoint makes us stupid.
User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5505 posts, RR: 7
Reply 22, posted (6 years 3 months 3 weeks 3 days 12 hours ago) and read 2065 times:



Quoting WorldTraveler (Reply 20):
any who knows anything about airline economics knows that LF is very closely correlated to RASM performance. The network carriers are operating with fairly stable yields and have been for several years; they are pricing their product fairly consistently. Thus, if the LF part of the RASM equation suffers, RASM WILL fall.

Hogwash.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineTxAgKuwait From United States of America, joined Aug 1999, 1803 posts, RR: 42
Reply 23, posted (6 years 3 months 3 weeks 3 days 11 hours ago) and read 2029 times:



Quote:
DLs RASM is at 11.1c just above industry average, UA has the highest at 13.0c and WN the lowest at 7.3c.

I had to do a double take. That 7.3 cents RASM figure has been "adjusted" to account for average stage length.

The real RASM for WN during Q2 should be in excess of 10.37 cents. When combined with a CASM of 9.7 or thereabouts, they weill have had a decent if unspectacular quarter.


User currently offlineUnited1 From United States of America, joined Oct 2003, 6019 posts, RR: 9
Reply 24, posted (6 years 3 months 3 weeks 3 days 10 hours ago) and read 2008 times:



Quoting TxAgKuwait (Reply 23):
Quote:
DLs RASM is at 11.1c just above industry average, UA has the highest at 13.0c and WN the lowest at 7.3c.

I had to do a double take. That 7.3 cents RASM figure has been "adjusted" to account for average stage length.

Sorry did't mean to cause you a small heart attack  Smile I shoud have explaned the numbers better.

When you are comparing RASM between airlines it is generally accepted that you "adjust" the number for average stage length. However the adjusted number is basically useless when it comes down figuring out the profit/loss part of the equation.



Semper Fi - PowerPoint makes us stupid.
25 MasseyBrown : But, as usual, there is a caveat. Carriers don't usually say exactly how they adjust the LOH. I have to believe they adjust it and present it to the
26 WorldTraveler : you know nothing about airline economics. nothing. If you did, you wouldn't summarily dismiss the role LF plays in the RASM equation. It's lesson one
27 MasseyBrown : I'm dismissing as hogwash your ignorance regarding the other half of the formula: your incorrect assertion that yields have been stable for several y
28 United1 : Was going to say UAs yield alone went up by 11.8%, DL 6%, AA 5.1% in Q108 compared to Q107. Should still show where they rank compared to their peers
29 Post contains links FATFlyer : Lets not forget Allegiant running counter to that trend. For a company focused on leisure traffic that was a very nice performance. Even with a slowi
30 WorldTraveler : the network carriers as a whole have been stable in their yield growth relative to their own past performance and to each other. No carrier has all o
31 Airzim : Laughable. Absolutely dead wrong. Absolutely no basis for this claim. They've cut capacity just like everyone else, that could easily account for a s
32 United1 : Costs... Excluding Fuel DL +4% AA +3.3% UA +2.4% Including Fuel DL +16% UA +15.9% AA +15.8% Does the fact that DL always has JFK-Europe on sale mean
33 FATFlyer : Not a major player but now coming up on 40 aircraft and adding more aircraft. That is up from 1 aircraft only 5 years ago. I also believe they have n
34 AirStairs : welcome to my RU
35 WorldTraveler : that is what revenue management is for. it is their job to offer many fares so that the appropriate number of each fare can be taken to maximize reve
36 United1 : CASM Q108 vs Q107... Is what you asked for and got....if you want something else I suggest that you look those numbers up yourself. To be bluntly hon
37 Airzim : Thanks. I don't have the patience to prove WT wrong anymore. He won't even respond directly to me anymore, because I constantly call him out on his B
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