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Combined Jan/Feb IATA vols (normalized for the timing of CNY) fell 1.6% y/y vs. -0.8% and -3.8% in Dec. and Nov. When HACTL reports March tonnage in the next few days we expect improved vols into easier comps and high tech product launches. Capacity continued to outpace demand for the 15th month in the past 16. PACR announced it sold and leased back 101 railcars for $11.5M. PACR previously purchased off lease 248 cars for $26.5M in Jan. and stated its plans to sell and lease back the cars by the end of 1Q. PACR has now sold all 248 railcars for a total of $28.4M, or $1.9M above the initial purchase price. We expect PACR to amortize this profit over the next several years, implying about a $0.01 annual EPS benefit, although these savings are expected to be mostly offset by higher maintenance costs, which is already reflected in its 2012 guidance range of $0.35 to $0.41.
DAL reported March traffic today, and with it disclosed PRASM growth of 13% y/y in the month, which compared favorably to our estimate of +11.5% y/y. DAL’s load factors increased in all regions, including a 650bp y/y increase in international loads. This was facilitated by easier y/y comparisons in Asia from last year’s Japanese earthquake and subsequent tsunami, but it appears DAL has not only recaptured its volumes to the region, but also pricing. April should be harder, however, as DAL is scheduled to restart Detroit-Haneda later this month after a nine month hiatus – we think that route was underperforming even before the earthquake. Nevertheless, demand trends seem much improved.
According to a few media reports today, ALGT is about to introduce a fee for carry-on bags, effective tomorrow. This would be a fee to use the overhead bin space, matching the same fee currently in place by SAVE. We had been anticipating this announcement for about a year, but the EPS benefit has never been in our estimates. We assumed ALGT would charge between $5 and $20 for use of the bin space, but it appears likely the fee will come in between $15 and $35, depending on stage length and point of purchase.
According to published schedule data AMR’s system-wide capacity (measured by seats, not ASMs) over the next three months (Apr-Jun) is down 2.35% y/y, an incremental 8bp higher than the schedule data from last week. We did not observe any changes to AMR’s schedule last week following five straight weeks of modest capacity additions. So the news here, we suppose, is that there’s still no major news on AMR’s near term capacity plan.
This week we examine the opportunity we believe investors have to own the LTL stocks into and out of 1Q reports. The quarter has now come and gone and our sense is the combination of mild weather, easy y/y fuel comparisons combined with rising diesel costs, surcharges and a benign calendar that included an extra day in February, five Fridays in March and an early Easter should all help propel upside LTL reports in 1Q:12. How sustainable are these near term LTL trends into rising ex-fuel inflationary costs? Why do we believe ABFS is relatively best positioned into rising inflation during 2012 and 2013?
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