DAL is hubbing BOS, as you know. DAL also hubbed SEA in 2013. There is symmetry to the two situations, and JBLU finds itself in a similar spot to the one ALK found itself in six years ago. A lower cost “tweener” airline, well-liked by its customers, forced to fight for market share as DAL builds to ~150 daily departures in its hometown market. A hometown city that’s a coastal U.S. gateway with good local demand but one poorly suited to enable domestic connections due to its geography.
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Terminating coverage post Onex acquisition. We are withdrawing our coverage of WJA following the completion of its acquisition by Onex Corporation.
Scheduled system seat capacity for the Jan-Apr four-month period shows seats +5.1% y/y, down 10bp w/w. Domestic growth was down 14bp w/w to +5.4% y/y as cuts by UAL and Frontier were slightly offset by adds from ALGT and SAVE. Pacific capacity was down 23bp w/w to +4.8% y/y, transatlantic was up 17bp w/w to +5.6% y/y, and Latin was up 21bp w/w to +1.6% y/y. Int’l growth was up 15bp w/w to +2.8% y/y. Domestic competitive capacity was down 30bp w/w to +5.7% y/y.
DAL hosted its analyst day in ATL. It was a two-day event (day one not webcast). DAL gave aggressive 2020 guidance on EPS ($6.75 to $7.75), top line (+4-6% y/y) and margins (flat, with flat fuel). DAL would do well to hit those latter two targets, in our view. RASM growth will have to come from yields (pricing) as load factor will likely be a headwind (we estimate ~0.5pp) as DAL laps a summer during which operations were stressed due to high passenger volume. That is not a DAL-only issue. Big picture: we are a bit nervous about the aggressive 2020 guidance, but we wouldn’t call it unrealistic – just optimistic. In a space we believe will lag going into 2020 we have a bias toward quality. That’s DAL.
Scheduled system seat capacity for the Jan-Apr four-month period shows seats +5.2% y/y, down 40bp w/w. Domestic growth was down 45bp w/w to +5.5% y/y through cuts by AAL, UAL, and HA. Pacific capacity was flat w/w at +5.1% y/y, transatlantic was flat w/w at +5.4% y/y, and Latin was down 9bp w/w to +1.4% y/y. Int’l growth was down 5bp w/w to +2.6% y/y. Domestic competitive capacity was down 48bp w/w to +6.1% y/y.
We believe U.S. airline pricing has not benefited from the grounding of the 737 MAX. We do agree with most, however, that RASM has benefited as airlines drove higher load factors particularly during this year’s peak summer months. Following the grounding of the 737 MAX late in 1Q19, y/y load factor growth for U.S. airlines accelerated 124bp q/q in 2Q19, the most in at least 30 quarters. Meanwhile y/y yields accelerated 133bp q/q, below the average rate of acceleration (180bp) during the same 30-quarter period. This sets up for a difficult headwind to overcome in 2020 as airlines will struggle to repeat or even hold on to load factor gains without further stressing their operations.
Scheduled system seat capacity for the Jan-Apr four-month period shows seats +5.6% y/y, flat w/w. Domestic growth was flat w/w at +6.0% y/y as cuts by DAL were offset by adds from SAVE. Pacific capacity was flat w/w at +5.1% y/y, transatlantic was down 4bp w/w to +5.4% y/y on rounding, and Latin was flat w/w at +1.5% y/y though SAVE cut some capacity. Int’l growth was flat w/w at +2.7% y/y. Domestic competitive capacity was down 4bp w/w to +6.5% y/y on rounding. There were no MAX changes this week.
DAL is wrapping up 2019 with its annual analyst day, a two-day affair in ATL on 12/11-12/12. We don’t expect major announcements. We expect DAL will provide its 2020 EPS guide, reiterate other key existing guidance data points, and focus on the concept of sustaining existing results while outlining tactical longer term initiatives. We believe attendance for the event will be strong.
Scheduled system seat capacity for the Jan-Apr four-month period shows seats +5.6% y/y, flat w/w. Domestic growth was flat w/w at +6.0% y/y as cuts by UAL, ALK, and Frontier were offset by adds from JBLU. Pacific capacity was down 56bp w/w to +5.1% y/y, transatlantic was up 2bp w/w to +5.5% y/y on rounding, and Latin was flat w/w at +1.5% y/y as cuts by ALK and SAVE were offset by adds from AAL and JBLU. Int’l growth was down 6bp w/w to +2.7% y/y. Domestic competitive capacity was flat w/w at +6.6% y/y.
Airbus is having production issues on its A321 line, which is transitioning to a new configuration called Airbus Cabin Flex (ACF). Airbus says it has a plan to get back on track, but some key A321 customers are skeptical despite 47 new A321neo orders this week at the Dubai Air Show. IAG said it expects delays may continue into 2022. Air Lease said problems are getting worse, not better. In terms of the impact to U.S. airlines, this puts 2020 capacity growth plans at risk for DAL, AAL, and JBLU. This is a watch item, we think.
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