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CO Report Indicates Trouble For US Airlines  
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Posted (5 years 7 months 2 weeks 4 days 13 hours ago) and read 5978 times:

CO is one of the few US airlines that reports RASM on a monthly basis and they also are one of the first US airlines to report their monthly performance. Because of CO's unique reporting situation, they are considered a bellwether for other US airlines - and often CO ends up middle of the pack or better in terms of their RASM performnce.

In their traffic and RASM report for January released today 2/2, CO reported that its RASM decreased, one of the very few times that RASM has decreased for CO.

"For January 2009, consolidated passenger revenue per available seat mile (RASM) is estimated to have decreased between 5.0 and 6.0 percent compared to January 2008, while mainline passenger RASM is estimated to have decreased between 3.5 and 4.5 percent compared to January 2008.

For December 2008, consolidated passenger RASM increased 4.0 percent compared to December 2007, while mainline passenger RASM increased 4.9 percent compared to December 2007."

Based on the traffic report contained in the same press release, CO appears to be suffering from a couple percent point drop in yields as well as a decrease in loads. CO's transatlantic and domestic systems had the biggest LF hits. Although yield and RASM are not reported on a regional (entity) basis each month, it is likely that transatlantic and domestic are also hard hit by yield decreases.

http://finance.yahoo.com/news/Contin...lines-Reports-prnews-14229804.html

As other carriers release traffic reports, particular attention should be paid to the entity LF reports.

It could be a long winter for many airlines and if these trends do not turn around quickly, deeper cuts are certain to come.

18 replies: All unread, jump to last
 
User currently offlineSpyderz From Canada, joined Apr 2001, 651 posts, RR: 0
Reply 1, posted (5 years 7 months 2 weeks 4 days 13 hours ago) and read 5919 times:

On the opposite end of the spectrum, expect JetBlue to post double-digit RASM growth for January; however those YOY increases should decline significantly in February and March.

With airline revenue typically lagging the economy by six months, only now are the airlines beginning to see the impact of the recession on revenues. This YOY RASM decline should occur for most of the industry for 2009 - thankfully for the airlines jet fuel has gone down substantially which could enable airlines to post full year profitability (just don't expect it in 1Q09).


User currently offlineEnilria From Canada, joined Feb 2008, 7191 posts, RR: 13
Reply 2, posted (5 years 7 months 2 weeks 4 days 13 hours ago) and read 5788 times:

Not great, but CASM is down 20% from the fuel peak and over 10% from the $100 oil level. Even those kind of drops should produce nice profitability improvements.

User currently offlineLAXDESI From United States of America, joined May 2005, 5086 posts, RR: 47
Reply 3, posted (5 years 7 months 2 weeks 4 days 11 hours ago) and read 5537 times:

From the link in the thread opener:

January 2009 estimated average price per gallon of
fuel, including fuel taxes 1.96 Dollars
First Quarter 2009 estimated average price per gallon
of fuel, including fuel taxes 1.99 Dollars

Doesn't look like CO expects any major drop in CASM due to fuel in 1Q 2009. I wonder if anyone had info. on CO's fuel hedges for 2009.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 4, posted (5 years 7 months 2 weeks 2 days 12 hours ago) and read 4772 times:

most US airlines have reported January traffic and the results show traffic weakness esp. in Latin and transatlantic. Domestic is yielding mixed results depending on the carrier. Of the carriers that have reported so far, AA shows LF weakness across all entities while UA does on all int'l entities but up on domestic LF. Every airline that operates in Latin America has shown weakness and it is not just to ethnic type markets since US is down and has far more Latin leisure rather than ethnic exposure.

DL/NW have not reported yet and have become the last airline to report traffic - probably due to the need for compiling and auditing results from 2 different systems.


User currently offlineMoman From United States of America, joined Aug 2004, 1054 posts, RR: 4
Reply 5, posted (5 years 7 months 2 weeks 2 days 10 hours ago) and read 4532 times:

Also consider this will probably be the worst January as far as most economic stats in 30 years, probably 60+ years.

Hopefully the spring will show a traffic rebound. Remember that many carriers didn't do massive flight cuts until late summer 2008. As for AA, their drastic cuts came with the 9/2 schedule, so until that time it's comparing apples with oranges.



AA Platinum Member - American Airlines Forever
User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5438 posts, RR: 7
Reply 6, posted (5 years 7 months 2 weeks 2 days 10 hours ago) and read 4496 times:

CO reported during their earnings conference call that front cabin traffic was down significantly on European flights and future bookings. That could account for much of the RASM decline all by itself.


I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 7, posted (5 years 7 months 2 weeks 2 days 1 hour ago) and read 4144 times:

and CO is not near as large in London where the financial crisis is being most felt in Europe although NYC is the epicenter of the financial crisis in the US, obviously affecting CO heavily.

considering that most US airlines still have significant underwater hedges through the first quarter at least, the cash is going at the windows of airline HDQs at very high rates.


User currently onlineMaverickM11 From United States of America, joined Apr 2000, 17502 posts, RR: 45
Reply 8, posted (5 years 7 months 2 weeks 1 day 17 hours ago) and read 3814 times:



Quoting WorldTraveler (Reply 4):
Every airline that operates in Latin America has shown weakness and it is not just to ethnic type markets since US is down and has far more Latin leisure rather than ethnic exposure.

This will be at least the third month in a row where DL has suffered a 5-7pt LF drop in Latin America YOY.



E pur si muove -Galileo
User currently offlineGSPSPOT From United States of America, joined Sep 2003, 3036 posts, RR: 2
Reply 9, posted (5 years 7 months 2 weeks 1 day 17 hours ago) and read 3770 times:



Quoting WorldTraveler (Reply 4):
Every airline that operates in Latin America has shown weakness and it is not just to ethnic type markets since US is down and has far more Latin leisure rather than ethnic exposure.

Wonder if it has anything to do with the sky-high J-class fares? I've been looking at GSP or ATL-SCL fares, and they're sometimes twice what DL in particular is charging for comparable transatlantic fares.



Finally made it to an airline mecca!
User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 10, posted (5 years 7 months 2 weeks 1 day 17 hours ago) and read 3743 times:

since AA just reported a 5 LF point drop in Latin traffic, DL's 7% drop doesn't seem quite out of place. And on an overall basis, DL's system LF was flat while AA's was down 3 points driven by significant domestic LF losses similar to some but not all other airlines.

DL managed its own capacity relative to demand well in other regions while NW took the brunt of the transatlantic hit for the DL group.

note that DL's cargo drop of 13% is one of the smallest decreases among network carriers. DL's transpac LF was flat on 50% more capacity - not many carriers added that much capacity in any region and kept LFs flat.

No one came out of the Jan traffic reports unscathed which is why the saying about throwing things in glass houses is appropriate.

Until there are clear winners across the board, the best thing is to hope for improved traffic that will benefit all carriers.


User currently offlineJetbluefan1 From United States of America, joined Dec 2003, 2982 posts, RR: 14
Reply 11, posted (5 years 7 months 2 weeks 1 day 14 hours ago) and read 3482 times:

JetBlue's PRASM increased a whopping 15% YOY this January. Do note that since CO and B6 are the only two airlines which break out PRASM changes per month (right?), then it may not be true that all U.S. airlines are necessarily in "trouble." I'm trying to figure out why there is such a huge difference between the two airlines' changes in PRASM, especially since both have large operations in the NYC market.

This may be an indication that international routes are facing higher yield pressures than domestic flights.

JetBluefan1



Most people on a.net hate JetBlue. Get used to it.
User currently offlineSlimShady From United States of America, joined Dec 2007, 196 posts, RR: 0
Reply 12, posted (5 years 7 months 2 weeks 1 day 14 hours ago) and read 3444 times:



Quoting LAXDESI (Reply 3):
Doesn't look like CO expects any major drop in CASM due to fuel in 1Q 2009. I wonder if anyone had info. on CO's fuel hedges for 2009.

I heard they hedged at $139 per barrell last summer.


User currently offlineSpyderz From Canada, joined Apr 2001, 651 posts, RR: 0
Reply 13, posted (5 years 7 months 2 weeks 1 day 13 hours ago) and read 3358 times:



Quoting Jetbluefan1 (Reply 11):
Do note that since CO and B6 are the only two airlines which break out PRASM changes per month (right?),

US Airways usually does and reported down 3%. Southwest usually doesn't, but reported up 6%.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 14, posted (5 years 7 months 2 weeks 1 day 1 hour ago) and read 3065 times:

B6 reduced capacity by 5% and reduced stage length by 6% both of which push RASM up. If both were kept constant, B6 would be looking at RASM increases of a couple to 5 per cent - respectable but not outstanding. The question is whether CASM went down as fast as capacity. In most cases we've seen last quarter, airlines find it very hard to get costs down as fast as they get capacity out.

User currently onlineMaverickM11 From United States of America, joined Apr 2000, 17502 posts, RR: 45
Reply 15, posted (5 years 7 months 2 weeks 23 hours ago) and read 2887 times:



Quoting WorldTraveler (Reply 10):
No one came out of the Jan traffic reports unscathed which is why the saying about throwing things in glass houses is appropriate.

True, but this is DL's third month of major deficits in Latin America. In fact it was the worst of the big three in two out of the last three months, and in the third only beat American by 0.1 LF pt.

AA CO DL
NOV (6.4) (1.0) (6.3)
DEC (2.3) 3.1 (4.5)
JAN (4.9) (1.4) (6.5)



E pur si muove -Galileo
User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5438 posts, RR: 7
Reply 16, posted (5 years 7 months 2 weeks 23 hours ago) and read 2830 times:



Quoting WorldTraveler (Reply 14):
In most cases we've seen last quarter, airlines find it very hard to get costs down as fast as they get capacity out.

Yes, but they're much better at this than they are at dealing with volatile fuel costs.

More troubling is the still-unknown extent of the traffic decline. Several airlines are saying quietly that they can't see a bottom yet. Since traffic declines lag the market, it's easy to say there's worse to come.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineLabswalker From United States of America, joined Dec 2008, 24 posts, RR: 0
Reply 17, posted (5 years 7 months 2 weeks 22 hours ago) and read 2671 times:

They let the fuel hedge go, and paid the penalty from what I understand. I think that was part of the multi- million dollar write off in the 4th quarter.

User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 18, posted (5 years 7 months 2 weeks 21 hours ago) and read 2586 times:



Quoting MaverickM11 (Reply 15):
True, but this is DL's third month of major deficits in Latin America. In fact it was the worst of the big three in two out of the last three months, and in the third only beat American by 0.1 LF pt.

again, you can throw stones but the data more than supports the facts that DL is overall doing a better job at managing its capacity than other airlines on a system basis.

and as I have pointed out, many times, DL apparently has the financial strength to withstand traffic declines in Latin America - its smallest entity on a combined basis with NW - because of the strategic implications in the region. If DL can make the overall system numbers work right, then it's kinda hard to argue that DL cannot run their business for the best profit. Other airlines have reported much greater LF declines on top of much larger operating losses in the most recent quarter.

Quoting MasseyBrown (Reply 16):
More troubling is the still-unknown extent of the traffic decline. Several airlines are saying quietly that they can't see a bottom yet. Since traffic declines lag the market, it's easy to say there's worse to come.

yes. the troubles are far from over and it isn't a given that the damage to balance sheets will remain as contained as it has been so far.

Quoting Labswalker (Reply 17):
They let the fuel hedge go, and paid the penalty from what I understand. I think that was part of the multi- million dollar write off in the 4th quarter.

I'm not sure who the "they" is but DL's fuel hedges losses were less than the industry as a whole when you consider that DL's financial results included about half of a quarter for NW. DL did have a significant amount of restructuring charges which other other carriers did not.


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