UPDATE 5 - September Airline Results Extravaganza

Here's a quick summary on all the airline results that I have seen so far:

AirTran
Sept RPM=950 Million (+11.6%) Load Factor=61.8 % (-9.4) ASM=1.5 Billion (+28.6%)
YTD RPM=10.4 Billion (+24.7%) Load Factor=74.1 % (-.2) ASM=14.0 Billion (+25.0%)

Alaska
Sept RPM=1.4 Billion (+5.9%) Load Factor=73.6% (+1.2) ASM=1.9 Billion (+4.2%)
YTD RPM=13.6 Billion (+6.0%) Load Factor=77.5% (+.9) ASM=17.5 Billion (+4.7%)

American (without American Eagle)
Sept RPM=10.6 Billion (-1.4%) Load Factor=75.5% (-.7) ASM=14.0 Billion (-.5%)
YTD RPM=106.2 Billion (+1.1%) Load Factor=80.5% (+1.8) ASM=131.8 Billion (-1.1%)

ATA (Scheduled Service)
Sept RPM=299.0 Million (-37.6%) Load Factor=74.5 % (+3.6) ASM=400.0 Million (-40.6%)
YTD RPM=3.1 Billion (-43.4%) Load Factor=80.0 % (+10.2) ASM=3.8 Billion (-50.6%)

Continental (Mainline and Regional)
Sept RPM=6.9 Billion (+11.5%) Load Factor=78.6% (+1.2) ASM=8.8 Billion (+9.9%)
YTD RPM=67.7 Billion (12.6%) Load Factor=81.0% (+1.7) ASM=83.6 Billion (+10.2%)

Delta
Sept RPM=9.1 Billion (-3.4%) Load Factor=74.6% (+1.5) ASM=12.2 Billion (-5.4%)
YTD RPM=88.2 Billion (-4.5%) Load Factor=78.8% (+1.5) ASM=112.0 Billion (-6.2%)

Frontier
Sept RPM=616.5 Million (+11.3%) Load Factor=67.6% (-3.4) ASM=911.6 Million (+17.0%)
YTD RPM=6.4 Billion (+17.7%) Load Factor=77.8% (+1.4) ASM=8.2 Billion (+15.7%)

Hawaiian
Sept RPM=548.8 Million (-4.0%) Load Factor=83.1% (-6.0) ASM=660.3 Million (+2.9%)
YTD RPM=5.1 Billion (+2.1%) Load Factor=86.8% (+0.1) ASM=5.9 Billion (+2.0%)

JetBlue
Sept RPM=1.6 Billion (+8.2%) Load Factor=72.6% (-5.1) ASM=2.3 Billion (+15.8%)
YTD RPM=17.5 Billion (+16.5%) Load Factor=78.8% (+1.5) ASM=21.3 Billion (+22.9%)

Northwest
Sept RPM=6.2 Billion (-5.5%) Load Factor=81.3% (+1.3) ASM=7.6 Billion (-7.1%)
YTD RPM=59.1 Billion (-6.5%) Load Factor=84.7% (+3.0) ASM=69.8 Billion (-9.8%)

Republic
Sept RPM=534,827(+49.0%) Load Factor=66.9% (+1.9) ASM=799,018(+44.7%)
YTD RPM=1.8 Million (+56.8%) Load Factor=72.9% (+4.7) ASM=2.5 Million (+46.5%)

Spirit
Sept RPM=299.0 Million (+15.0%) Load Factor=70.0% (-2.4) ASM=427.0 Million (+18.8%)
YTD RPM=3.4 Billion (-4.0%) Load Factor=72.4% (-1.0) ASM=4.3 Billion (-2.7%)

Southwest (System)
Sept RPM=5.2 Billion (+9.8%) Load Factor=67.2%(-.2) ASM=7.7 Billion (+10.1%)
YTD RPM=50.9 Billion (+12.9%) Load Factor=74.0% (+2.9) ASM=68.7 Billion (+8.4%)

United (System)
Sept RPM=9.3 Billion (+1.3%) Load Factor=79.5%(-.7) ASM=11.6 Billion (+2.3%)
YTD RPM=89.0 Billion (+3.5%) Load Factor=82.8% (+.9) ASM=107.6 Billion (+2.3%)

US Airways (Combined US Airways, America West and Regional)
Sept RPM=4.8 Billion (-4.8%) Load Factor=72.2 % (-.5) ASM=6.6 Billion (-4.2%)
YTD RPM=48.1 Billion (-6.8%) Load Factor=78.8 % (+2.1) ASM=61.1 Billion (-9.3%)

Update 1 - Added JetBlue
Update 2 - Added Frontier and Spirit
Update 3 - Added Southwest and alphabetized
Update 4 - Added Northwest
Update 5 - Added Hawaiian

AirTran Delays Aircraft Delivery (But Look at the Capacity Plans)

AirTran's announcement yesterday that they would delay delivery of 8 Boeing 737-700s has a Jekyll and Hyde quality about it. Delaying delivery on aircraft in the face of what they see as softening demand this year makes sense. Dr. Jekyll is making perfect sense. Mr. Hyde lurks further down in the outlook AirTran has for growth in 2007.

After the delays, AirTran expects to take delivery of 14 planes in 2007 and 15 planes in 2008. This represents expected capacity growth of 19 percent to 20 percent in 2007, and 9 percent to 11 percent in 2008, the company said.

This growth is far more agressive than the 5-7% growth the Continental Airlines is predicting over the coming years. I know I keep banging this drum but widespread aggressive growth, i.e. increases in capacity, in 2007 could endanger to the recovery of the airlines industry. I will have to watch for more airlines to make forward looking statements on their plans for 2007. Airlines need to carefully measure their capacity against demand or Mr. Hyde will run amok.

Dangerous Words from Continental Airlines

Continental Airlines announced Tuesday (Reuters link)that they are forecasting an increase of 5-7% in their capacity over the coming years. Continental's capacity has already grown nearly 9% this year due to increased competition at their hubs. Here's what I consider to be the dangerous words from Continental President Jeff Smisek at a company conference for investors that was available by Webcast :

The company responded, and will always respond to incursions at its hubs, with lower prices and more flights..."We will never lose customers at our hubs on price,"

Legacy airlines with a hub system will always protect those hubs like a mother protecting her young...I'm not exaggerating. They will brutalize competitors by pouring capacity and offering low fares even if it means losing money. In a microcosm you would just consider that tough business practices in a competitive environment. But it becomes a vicious cycle in the airline industry that can run unchecked. The result is over-capacity and an inability for the airlines to control pricing in order to make money. Sound familiar? It should because the airlines have just this year managed to get their pricing under control and they did it by reducing capacity. So now, as business improves we will sit back and watch. Have the airlines learned anything at all from their debacle?

Continental Airlines and the Golden Share

Surely Continental Airlines makes a pretty attractive partner when it comes to all the airline merger-mongering of late. Ever wonder why nothing seems to materialize? I know I was until I read this Reuters article . A long time ago in a galaxy far far away Northwest Airlines owned a boat load of Continental Airlines stock. That is until the Department of Justice sued Northwest in 2001 for anti-competitive practices, ultimately forcing the airline to sell all but one of their shares. Ahhhh but that one share, the golden share. Golden because it gives Northwest the right to veto any merger involving Continental. I am pretty sure Northwest will keep Continental on a short leash. Northwest and Continental have some pretty extensive code sharing arrangements. Plus a Continental merger would put Northwest at a disadvantage.

International Routes are all the Rage

I have posted several times that the trend will be for legacy carrier in the US to build their international routes. Seriously, I said it here, here and even way back here and here. Why? First, they don't have much in the way of competition from low cost carriers. They are competing with other legacy carriers so the playing field is mostly level. Second, international routes have a better profit margin right now when compared to domestic routes where they face intense competition from low cost carriers.

China is one of the big battle grounds for international expansion. Not surprisingly the list of competitors is exclusively made up of legacy carriers. Northwest Airlines, American Airlines, Continental Airlines and United Airlines are all making their cases to the government (and the public) on why they should be chosen for new China routes that are will be awarded. The Cranky Flier has a really nice summary of how this competition is lining up and who may have an advantage. Go check it out.

When is Cheap Fuel Bad News?

After months of moaning about fuel prices every airline should be turning cart-wheels as fuel prices dip. Oddly enough, if you're American Airlines, United Airlines or Continental Airlines those lower fuel prices are not great news because you hedged on fuel last quarter at costs that are actually higher than current. Reuters has a good article that lays it out nicely. In summary, the oil companies are thanking these airlines for pre-buying a bunch of fuel at peak prices. So the benefit of this respite in fuel prices is somewhat muted for American, United and Continental. I was surprised to see Continental got caught in this gamble. Continental has stated in the past that they simply do not hedge on fuel. Smackdown quote goes to CreditSights airline analyst Roger King, "It was a complete blank-out on the basics of business management, Business school 101 says you have to hedge uncontrollable costs." Yeah...what he said.

Parisian's Searching for...Cleveland?

There are 4 people is Paris right now that are just super happy because Continental has announced non-stop service between Cleveland and Paris. In the meantime folks in Cleveland dusted off their world maps to see just what this means to them. Alright...alright...I know, that was unwarranted and just a bit mean, insert sarcasm tag here. This should actually be a good move for Continental as it opens up Europe direct for a lot of folks that were used to bouncing through a hub to get there. Even better for Continental, international flights are where the money is at right now. So maybe they can drive some extra domestic traffic to Cleveland AND grab some extra gold by hauling folks to Paris from Cleveland.

Editors Note: First time using Paris and Cleveland in the same post...EVER.

NEWS: Fine...Let's Talk About United and Continental

Everybody's buzzing about rumors of a merger between United Airlines and Continental Airlines so I will weigh in too. Simply put, I think its a bad idea for Continental. Yes, in terms of routing structure the two airline look complimentary. But I think United would simply be a burden on Continental. United still brings a load of problems despite their supposed recovery. Continental on the other hand is managing fairly nicely on their own. One has to admit that United's international routes are a tempting target. I just think those international routes come with too much baggage attached.

One other note. Naysayers to the merger rumors also point out the difficulties of trying to combine unions and its true this can sap the energy in an organization. But America West and US Airways are showing that it is possible and perhaps even a little easier given the increased leverage airlines have in negotiating with the unions.

NEWS: Reduced Fares are NOT Killing the Airlines

Today's Hero is Jamie Baker of J.P. Morgan Chase who also gets the quote of the day award. But first...the back story. I recently ranted on the whining and complaining from other major airlines about the impact Delta's Simplifares would have revenue. Today's news supports my position. Airline revenues have beat analyst predictions for January by actually edging up over last years performance while average fares fell. This is with Delta's supposedly devastating revenue impailing fare cuts in place for nearly the whole month. Now...back to Today's Hero Mr. Baker, who is quoted from his research paper Wednesday:

"Perhaps mimicking the domestic pricing philosophy of low-cost carriers and improving the value proposition of business travel though reasonable fares isn't as stupid as recently suggested by one airline management,"

Well put Mr. Baker! I believe this puts the ball back into the court of Jeff Smisek, Continental Airlines President.

Jeff Smisek, Continental Airlines President, was the target of this quote because he called Delta's Simplifare plan "simply stupid" with God and country listening via the Wall St. Journal. I'll be interested to see if Mr Smisek will step up to the plate on this one. Perhaps having a quote in the Wall St Journal that gets knocked down and stepped on will make him a little gun shy about further quotes. Round 1 goes to Delta.

Finally, I'd be remiss if I did not point out that, despite the increase in revenue, the airlines still had a dismal January with with lots of losses. Fuel prices and overcapacity are still taking a brutal toll.