Our quarterly review of seat growth by airline shows, in aggregate, a downtick in competitive capacity growth to +2.8% y/y, down from 3.7% y/y last quarter. Most airlines have positive trends in 3Q (only three show an uptick), and UAL stands out as a big winner. We also examined domestic CC trends for U.S. airlines by revenue quartile (last week), and UAL also stood out as a near term winner by that measure, too. Note the overall +2.8% y/y competitive seat growth is the lowest in the low oil price era (3Q14 it was +2.3% y/y) and is tracking well below overall capacity growth of +3.5% y/y. Baby steps.
Search Coverage List, Models & Reports
Search Results1-10 out of 1886
Last Friday before the market opened ALK filed traffic and an investor update in which ALK revised its 2Q and FY18 guides. Specifically, ALK trimmed its FY18 capacity growth from a previous plan of 6.5% to a range of 6.2-6.5%. We believe the lower growth is from a combination of higher fuel prices and the delayed opening of Paine Field (Seattle) due to the FAA’s review of noise and ground traffic that’s likely to push the airport’s opening from September to early 2019.
Scheduled capacity from U.S. airlines in the Sep-Dec four-month period shows system seat growth crept up 10bp this week to +5.0% y/y. Domestic seat growth also increased 10bp to +5.2% y/y due to six of 10 airlines scaling up capacity (although slightly). October led with the most additions, followed by December. It’s still very early, though, and December adds can likely be taken right back out fairly quickly, if needed. But, for now, they’re in there. Int’l seat growth remained unchanged w/w as big adds by SAVE in LatAm were offset by large cuts by AAL in the transatlantic and transpacific.
Competitive capacity. Most of us watch it closely. But as Scott Kirby likes to say, not all capacity is created equal. That’s true! We pulled each U.S. airline’s total domestic revenue, by market, then we pulled schedule data to determine competitive capacity growth each is facing in the coming quarters, weighted by each airline’s own revenue exposure.
NOC closed OA acquisition on 6/6, in line with its 1H18 timing and roughly nine months after announcing the deal. OA is NOC’s fourth business sector called Innovation Systems and is led by Blake Larson, OA’s COO before the acquisition. There were some who assumed that the NOC-OA combination could inhibit competition, particularly on applications that require solid fuel rocket motors like the upcoming GBSD competition between primes NOC and BA. But the FTC approved the deal contingent on NOC creating firewalls between the acquired solid fuel rocket motors business and the rest of the company, and NOC agreeing to provide these motors to competitors on a nondiscriminatory basis. The DoD’s acquisition and sustainment office will monitor NOC for compliance.
HA filed an investor update today and lowered 2Q RASM guidance by 1pp at the midpoint (now +0.5% from +1.5% y/y) and worsened cost guidance, fuel and non-fuel. We are lowering estimates by 9% and trimming our target price from $64 to $59 on these likely non-recurring issues.
Tomorrow (06/12), the U.S. District Court in Washington should rule on the DoJ’s action to block the proposed merger between TWX and T. We believe the decision could impact how airlines think about M&A, specifically a UAL pursuit of JBLU. Though the nature of the TWX and T merger is different than a UAL-JBLU tie-up (vertical integration vs. horizontal), a DoJ on its heels is less likely to aggressively block other deals, one would think.
Scheduled capacity from U.S. airlines in the Sep-Dec four-month period shows system seat growth of +4.9%, down ~20bp from last week, though still modestly ahead of the +4.0% y/y growth rate on schedule for the summer (May-Aug). Domestic seat growth declined 30bp to +5.1% y/y driven mainly by AAL and UAL with further help by ALK and Frontier. DAL and SAVE added. Int’l seat growth stayed flat w/w at +3.2% y/y.
When airlines guide to 3Q RASM, they’ve already flown or sold ~50-60% of RPMs, by our estimate, the most “booked” revenue QTD of any of the three quarters due to heavy seasonality in July relative to the rest of the quarter. In aggregate from 2013-17, airlines flew 6.4% more RPMs in July than they do in September, which is by far the biggest front-loaded period of the year. This, in turn, leads to the best accuracy rate (63%) of quarterly RASM guides. Airlines beat quarterly guides the most often in 4Q likely due to guidance conservatism from so much demand in the last week of the year around the holiday season. Because of that, bad weather in late December often has a big impact on 4Q revenues so airlines tend to play it safe on guidance particularly given airlines bank so hard on the last 10 days of 4Q. This is probably another reason that seasonality trade has worked out so well for the airlines over the last few years, that 4Q conservatism.
DAL presented today (6/6/2018) at a DB conference and lowered 2Q EPS guidance from $1.80-$2.00 to $1.65-$1.75 partially on higher fuel but also on CASMx, which DAL now expects to increase 3% y/y, the high end of the prior range of +1-3% y/y.
- 1 of 189
- next →