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Scheduled system seat capacity for the May-Aug four-month period shows seats +3.5% y/y, up from +3.4% y/y last week due to rounding (up 2bp w/w). Domestic seat growth was flat w/w at +3.5% y/y, as additions from ALGT and Frontier were offset by cuts from ALK, SAVE, and DAL. Pacific capacity was flat w/w at -0.5% y/y, transatlantic was flat w/w at +5.6% y/y, and Latin ticked up 6bp w/w to +2.9% y/y on adds by SAVE and Frontier. Int’l capacity growth was up 4bp w/w to +3.3% y/y. Domestic competitive capacity was flat w/w at +3.0% y/y. There were no MAX-related changes this week.
We read every proxy statement for the airlines we cover. We highlight noteworthy things, some subtle and some obvious. We aggregate the drivers of 2018 CEO pay in easy-to-read tables and show how pay metrics changed from last year. And again, for reference, we show how pay drivers at each airline have evolved since 2007.
Canadian private equity shop Onex Partners today announced its intention to buy WJA for CAD3.5 billion in cash, or $31/share (CAD), a 67% premium to where WJA closed on Friday. We are suspending our rating on WJA, which we’d rated Underperform into this proposed acquisition.
Scheduled system seat capacity for the May-Aug four-month period shows seats +3.4% y/y, down 6bp w/w. Domestic seat growth was flat w/w at +3.5% y/y, though technically down 7bp on cuts from AAL and UAL. Pacific capacity was down 12bp w/w to -0.6% y/y, transatlantic was flat w/w at +5.6% y/y, and Latin was flat w/w at +2.8% y/y, as adds by AAL were entirely offset by cuts from ALK. Int’l capacity growth was flat w/w at +3.2% y/y. Domestic competitive capacity was 7bp lower w/w to +3.0% y/y. AAL and UAL added MAX flying this week while LUV made no MAX-related changes.
There are two airline conferences in the coming weeks, one of which is ours on May 20-22 in NYC. We’ve prepared 10 questions for each airline/union to help you prepare, and some high level industry thoughts.
CPA hosted its 1Q19 earnings call today (5/9/19) after its report last night. CPA’s turnaround is going better than anticipated but did note that all of 2019 should be considered “recovery mode,” while taking steps to manage expectations about the pace of the recovery. Still, CPA guided to an ~8pp q/q improvement in RASM growth from 1Q19 into 2Q. CPA added that it has a positive PRASM outlook in most markets, but that the operating environment is still challenged, especially in Argentina.
CPA reported 1Q19 EPS of $2.11, above our $1.30 and consensus of $1.54. Better than expected RASM (-7.7% y/y vs our -12.3% y/y) and CASMx (-2.9% y/y vs our -0.9% y/y) drove CPA’s beat compared to our estimates, offset by higher non-op expense. CPA’s guidance implies 2019 EPS of ~$7.00 using a 13% margin midpoint, basically in line with consensus of $7.01 but above our prior estimate of $6.32. All else equal that’s a win given most of those estimates predate the MAX grounding and a run in fuel. CPA restated some numbers from IFRS 16 but by our math on an apples-to-apples basis: CPA cut FY19 capacity growth by 1pp to +1% y/y (presumably mainly due to MAX issues), worsened CASMx by 1pp to ~+2.5% y/y but raised RASM guidance by ~2pp to ~+0.3% y/y.
WJA reported 1Q EPS of $0.40, above consensus of $0.30 on a $15M gain on sale of assets ($0.09/share), most of which relates to its sale leaseback on its first three 787-9s. WJA pulled its 2019 guidance back in March on the grounding of its 737 MAX fleet (10% of system capacity) and neither reinstated prior guidance nor introduced a new guide for 2019 or 2Q19. WJA did, however, say its 2020-22 guidance remains in place. WJA beat the midpoint of its prior 1Q19 CASMx guide and missed the low end of its 1Q19 RASM guide and attributed the RASM miss to Swoop dilution from disproportionately more growth from the ULCC. Overall, we thought this quarter was okay. The print was enough to drive some outperformance while the call felt focused on near term issues.
Scheduled system seat capacity for the May-Aug four-month period shows seats +3.5% y/y, down 4bp w/w. Domestic seat growth was down 5bp w/w to +3.5% y/y on cuts from UAL and ALGT slightly offset by adds from Frontier. Pacific capacity was flat w/w at -0.4% y/y, transatlantic was flat w/w at +5.6% y/y, and Latin was flat w/w at +2.8% y/y. Int’l capacity growth was flat w/w at +3.2% y/y. Domestic competitive capacity was flat w/w at +3.1% y/y. Ex-MAX-related cuts (which were minimal this week), this summer’s domestic growth rate would have been down 4bp from last week.
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