24/7 Wall St. » JBLU

When Will Low Oil Help Airlines Out? (UAL, DAL, LCC, LUV, JBLU)

Administrator — Wed, 23 May 2012 18:53:14 +0000

Oil is tanking behind Europe, commodity inventories are up, and refineries are running at very high historic levels. And guess what, airplanes are full, fares are up, carriers are passing on endless costs to customers, and capacity remains high. As long as the U.S. does not follow Europe into a meltdown it should be a perfect storm for the U.S. airline sector. So why are airline stocks getting hit with the broad market so much?

Oh, and someone some day will probably buy AMR or parts of it out of bankruptcy for a song. Perhaps it is simply just another 100-point-plus drop in the DJIA or another double-digit drop in the S&P 500 Index. The major airline carriers are trading today:

United Continental Holdings, Inc. (NYSE: UAL) is down 1% at $21.61 against a 52-week range of $15.51 to $26.50; UAL was above $24.00 just one week ago.

Delta Air Lines Inc. (NYSE: DAL) is down 0.8% at $10.45 with a 52-week range of $6.41 to $11.58; Delta is down almost 10% in less than two weeks.

US Airways Group, Inc. (NYSE: LCC) is down only 0.4% at $10.58 against a 52-week range of $3.96 to $11.73; US Air is down about 10% in less than two weeks.

Southwest Airlines Co. (NYSE: LUV) is performing the worst of the lot because most investors believe that are actively hedging and that means they won’t benefit as much from lower oil prices. Southwest’s share price is down 1.2% at $8.18 against a 52-week range of $7.15 to $12.04.

JetBlue Airways Corporation (NASDAQ: JBLU) is an exception to the rule today. Its shares are up 3% at $4.40 against a 52-week range of $3.40 to $6.32 in part on follow-on buying after a director of the company bought more than $200,000 worth of stock.

The question that has to be asked is how the end of summer demand is going to be and how the end of 2013 will hold up. Right now investors are using anything as a source of funds but the movement here might be acting differently than it should be.

JON C. OGG

Filed under: Airlines, Oil & Gas, Transports Tagged: DAL, featured, JBLU, LCC, LUV, UAL

Top Analyst Upgrades & Downgrades

Administrator — Mon, 14 May 2012 12:33:05 +0000

These are some of the top analyst upgrades, downgrades and initiations seen in Wall Street research calls this Monday.

Banco Bilbao Vizcaya Argentaria (NYSE: BBVA) Cut to Sell at Societe Generale.

Eastman Chemical Co. (NYSE: EMN) named Bull of the Day at Zacks.

First Republic Bank (NYSE: FRC) Started as Overweight at JPMorgan.

Jetblue Airways (NASDAQ: JBLU) Cut to Neutral at Stern Agee.

Kirkland’s, Inc. (NASDAQ: KIRK) named Bear of the Day at Zacks.

Macy’s Inc. (NYSE: M) named as Value stock of the day at Zacks.

NetSuite Inc. (NYSE: N) Raised to Conviction Buy List at Goldman Sachs.

NextEra Energy, Inc. (NYSE: NEE) Raised to Outperform at Baird.

Nokia Corporation (NYSE: NOK) Cut to Sell at Soc-Gen.

Repblic Services Inc. (NYSE: RSG) Cut to Neutral at Wedbush Morgan.

Splunk, Inc. (NASDAQ: SPLK) Started as Buy at BofA/ML; Started as Equal-weight at Morgan Stanley; Started as Neutral at UBS; Started as Outperform at Credit Suisse.

Symantec Corporation (NASDAQ: SYMC) Cut to Sell at Goldman Sachs.

Teradata Corporation (NYSE: TDC) Raised to Overweight at Barclays.

Tumi Holdings, Inc. (NYSE: TUMI) Started as Buy at Jefferies; Started as Outperform at William Blair; Started as Neutral at Credit Suisse.

Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) Raised to Overweight at JPMorgan.

If you enjoyed the top analyst upgrades and downgrades, you can join our free email newsletter that includes analyst summaries each morning sent right to your inbox. We also cover top issues such as IPOs, special financial exclusives, mergers and more. Sign up in the box below.

JON C. OGG

Filed under: Analyst Calls Tagged: BBVA, EMN, featured, FRC, JBLU, KIRK, M, N, NEE, NOK, RSG, SPLK, SYMC, TDC, TUMI, VRTX

24/7 Wall St. Closing Bell (GD, ABB, HOG, COP, S, ALU, MO, PEP, TLAB, XOM, AET, BMY, BG, JBLU, LIZ, MJN, REGN, SWY, SWC, TASR, UPS, YNDX, NRGY, SPH, LEAP, AKAM)

Paul Ausick — Thu, 26 Apr 2012 20:06:31 +0000

Markets opened a few ticks lower this morning after a poor report on new claims for unemployment benefits in the US (our coverage here). The report that pending home sales jumped 4.1% lit a fire under investors and pushed equities higher (our coverage here). The EIA report on natural gas supplies held gas prices higher although they’ve dropped back by late afternoon (our coverage here). Yields on 7-year US Treasury notes were at a record low following Fed Chairman Ben Bernanke’s clarification of what “exceptionally low” interest rates mean (our coverage here). The US dollar index fell today, now down -0.17% at 78.932. The GSCI commodity index is up 0.04% at 677.57, with commodities mixed on the slightly weaker dollar. WTI crude oil closed up 0.4% at $104.55/barrel, and Brent crude trades up 0.65% at $119.89/barrel. Gold settled up 1.1% today, at $1,660.50/ounce.

The unofficial closing bells put the DJIA up nearly 114 points to 13,204.70 (0.87%), the NASDAQ rose nearly 21 points (0.69%) to 3,050.61, and the S&P 500 rose 0.67% or more than 9 points to 1,399.99.

There were several analyst upgrades and downgrades today, including General Dynamics Corp. (NYSE: GD) cut to ‘equal-weight’ at Morgan Stanley; ABB Ltd. (NYSE: ABB) cut to ‘neutral’ at JPMorgan; Harley-Davidson Inc. (NYSE: HOG) raised to ‘overweight’ at Barclays; ConocoPhillips (NYSE: COP) raised to ‘neutral’ at Macquarie; and Sprint Nextel Corp. (NYSE: S) maintained as ‘hold’ at Argus.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Alcatel-Lucent S.A. (NYSE: ALU) is down -16.9% at $19.71 (our coverage here); Altria Group Inc. (NYSE: MO) is up 0.9% at $31.96 (our story here); Pepsico (NYSE: PEP) is down -0.3% at $66.44 (our story here); Tellabs Inc. (NASDAQ: TLAB) is down -5.1% at $3.83 (our coverage here); Exxon Mobil Corp. (NYSE: XOM) is down -0.8% at $86.13 (our coverage here); Aetna Inc. (NYSE: AET) is down -8.4% at $45.22; Bristol-Myers Squibb Co. (NYSE: BMY) is down -1.7% at $33.72; Bunge Ltd. (NYSE: BG) is down -2.6% at $65.69; JetBlue Airways Corp. (NASDAQ: JBLU) is down -0.1% at $4.64; Liz Claiborne Inc. (NYSE: LIZ) is up 9.4% at $13.87; Mead Johnson Nutrition Co. (NYSE: MJN) is up XX% at $XX; Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) is up 4% at $86.38 after posting a new 52-week high of $87.26n earlier today; Safeway Inc. (NYSE: SWY) is down -2.8% at $21.00; Stillwater Mining Co. (NYSE: SWC) is down -4.6% at $10.69; TASER International Inc. (NASDAQ: TASR) is up 5.7% at $4.39; United Parcel Service Inc. (NYSE: UPS) is down -1.8% at $78.25; and Yandex N.V. (NASDAQ: YNDX) is down -5% at $23.31.

Other standouts from today include the following stocks:

Inergy L.P. (NYSE: NRGY) is up 17% at $19.71. The company is being acquired by Suburban Propane Partners LP (NYSE: SPH). More coverage here.

Leap Wireless International Inc. (NASDAQ: LEAP) is down -20.2% at $6.16. The wireless carrier fell sharply on disappointing quarterly results. More coverage here.

Akamai Technologies Inc. (NASDAQ: AKAM) is down -14.8% at $33.03. The technology provider beat estimates but issued weak guidance.

Stay tuned for Friday. We have noted the following events on the schedule (all times Eastern):

8:30 a.m. – GDP report
8:30 a.m. – Employment cost index
9:55 a.m. – Reuters/University of Michigan consumer sentiment index

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ABB, AET, AKAM, ALU, BG, BMY, COP, GD, HOG, JBLU, LEAP, LIZ, MJN, MO, NRGY, PEP, REGN, S, SPH, SWC, SWY, TASR, TLAB, UPS, XOM, YNDX

Airlines Post Gains on Fuel Hedges, Revenues Up Too (DAL, LCC, LUV, AAMRQ, UAL, JBLU, FAA)

Paul Ausick — Wed, 25 Apr 2012 17:24:29 +0000

Two of the US’s largest airlines reported earnings today, Delta Air Lines Inc. (NYSE: DAL) and US Airways Group Inc. (NYSE: LCC), and both showed a profit thanks to mark-to-market gains on fuel hedges. At Delta, adjusted EPS actually showed a loss of -$0.05/share, right on the consensus estimate and far better than the EPS loss of -$0.38 that the company posted in the same period a year ago. Revenue of $8.41 billion topped the consensus estimate of $8.36 billion.

At US Airways, profits rose to $48 million, which included a one-time gain of $73 million on a transaction with Delta related to takeoff and landing rights at LaGuardia and Reagan National. Stripping out the one-time items, US Airways posted an EPS loss of -$0.13, far better than the EPS loss of -$0.68 in the same period a year ago and nearly two times better than the consensus analyst estimate for an EPS loss of -$0.25. Revenue of $3.27 billion was also better than the consensus estimate of $3.24 billion.

The two airlines follow Southwest Airlines Co. (NYSE: LUV) and AMR Corp.’s (OTC: AAMRQ.PK) American Airlines, both of which reported earnings last week. Southwest also posted a profit on hedging gains, and American’s loss, stripping out one-time charges, was 40% smaller than it was in the same period a year ago.

United Continental Holdings Inc. (NYSE: UAL) is scheduled to report earnings tomorrow, as is JetBlue Airways Corp. (NASDAQ: JBLU). The consensus estimates call for United to post an EPS loss of -$1.03 on $8.58 billion in revenue and for JetBlue to post EPS of $0.08 on revenue of $1.19 billion.

The good news for airlines is that traffic is up, ticket prices have been raised, and some capacity has been wrung out. The wild card, of course, is fuel costs. Data from the International Air Transport Association (IATA) indicates jet fuel cost $3.245/gallon, down -2.4% from March, and down -1.9% from the same period last year. The IATA estimates the average cost for a barrel of jet fuel in 2012 will be $135, which will raise the industry’s total fuel bill by $41 billion over the year.

Delta’s shares are down about -0.3% in the early afternoon, at $10.45 in a 52-week range of $6.41-$11.60. US Airways’ shares are up 2.9% at $9.58, in a 52-week range of $3.96-$10.35.

The lightly traded Guggenheim Airline ETF (AMEX: FAA) is up 0.14% at $29.30 in a 52-week range of $23.82-$39.18.

Paul Ausick

Filed under: Airlines, Earnings, Transports Tagged: AMR, DAL, FAA, JBLU, LCC, LUV, UAL

Top Analyst Upgrades & Downgrades (BLL, CAT, CHK, DANG, ESL, GEOI, INFY, IVZ, JBLU, PHG, PAA, UIL, VNO, WDR)

Administrator — Mon, 16 Apr 2012 12:18:30 +0000

These are some of the top analyst upgrades, downgrades and initiations seen in Wall Street research calls.

Ball Corporation (NYSE: BLL) Cut to Neutral at Credit Suisse.

Caterpillar Inc. (NYSE: CAT) Raised to Buy at BofA/ML.

Chesapeake Energy Corporation (NYSE: CHK) Cut to Neutral at Citigroup.

E-Commerce China Dangdang Inc. (NYSE: DANG) Cut to Neutral at Credit Suisse.

Esterline Technologies (NYSE: ESL) Raised to Outperform at Credit Suisse.

GeoResources, Inc. (NASDAQ: GEOI) named as Value stock of the day at Zacks.

Infosys Ltd. (NASDAQ: INFY) Cut to Hold at Deutsche Bank; Cut to Neutral at Macquarie.

Invesco, Ltd. (NYSE: IVZ) named as Bull of the Day at Zacks.

JetBlue Airways Corp. (NASDAQ: JBLU) Reiterated Hold at Argus.

Philips Electronics N.V. (NYSE: PHG) Named as Bear of the Day at Zacks.

Plains All American Pipeline. L.P. (NYSE: PAA) Reinstated as Outperform at Credit Suisse.

UIL Holdings Corp. (NYSE: UIL) Reiterated Hold at Argus.

Under Armour, Inc. (NYSE: UA) Reiterated Buy at Canaccord Genuity.

Vornado Realty Trust (NYSE: VNO) Raised to Outperform at Keefe Bruyette & Woods.

Waddell & Reed Financial Inc. (NYSE: WDR) Raised to Neutral at Citigroup.

JON C. OGG

Filed under: Analyst Calls Tagged: BLL, CAT, CHK, DANG, ESL, GEOI, INFY, IVZ, JBLU, PAA, PHG, UIL, VNO, WDR

Analyzing JetBlue Brand Damage From Pilot ‘Incident’ (JBLU)

Administrator — Wed, 28 Mar 2012 17:40:57 +0000

JetBlue Airways Corporation (NASDAQ: JBLU) is probably going to come out of this crazy pilot scandal OK. That is what shares are indicating with a gain of nearly 2%. In something almost unprecedented, a captain’s freak-out session is something that you would expect to read about in the tabloids rather than in financial news.

CNBC reported that the airline has now formally suspended the pilot whose erratic ranting caused the plane from New York to Las Vegas to be diverted. The pilot was said to have been a pilot with the airline going back to the year 2000.

The removal of active duty and suspension is the first step that the airline will take. Without knowing the specifics of labor laws specific to pilots, this captain’s flying days are over. Whatever the medical condition was other than the pilot being slipped a dose of LSD without his knowledge, the FAA probably has the right (and duty) to make sure that the pilot never flies again.

As far as JetBlue is concerned, unless this turns into a scandal where testing and evaluation of pilots is not done at all, the airline should probably not have much negative impact on this incident. It is probably safe to assume that some passengers who were on that plane will sue (individually or collectively) for stress after worrying that the plane was suddenly at-risk.

Having a passenger mental breakdown is one thing. Having a pilot’s mental breakdown is another thing entirely.

JetBlue shares are trading up nearly 2% at $5.15 and the 52-week trading range is $3.40 to $6.45.

JON C. OGG

Filed under: Airlines Tagged: JBLU

Is There an Airline Stock with Upside Potential? (AMR, DAL, UAL, LUV, LCC, JBLU, ALK, HA, SAVE)

Paul Ausick — Thu, 08 Dec 2011 19:04:53 +0000

The recent bankruptcy filing by AMR Corp. (NYSE: AMR), parent of American Airlines, has put a damper on any enthusiasm there might have been among investors for US airlines stocks. A report yesterday from the International Air Transport Association (IATA) added to the negativity, noting that total profits could be halved in 2012.

With American Airlines on the sidelines, we’ve looked at the stocks of several other US carriers in a search for some hidden value: Delta Air Lines Inc. (NYSE: DAL), United Continental Holdings Inc. (NYSE: UAL), Southwest Airlines Co. (NYSE: LUV), US Airways Group Inc. (NYSE: LCC), JetBlue Airways Corp. (NYSE: LCC), Alaska Air Group Inc. (NYSE: ALK), Hawaiian Holdings Inc. (NASDAQ: HA), and Spirit Airlines Inc. (NASDAQ: SAVE).

Delta Air Lines has a median target price of $18.00 and is trading at $8.39 around noon today. The implied gain here is about 115%. Delta’s share price is about -1.5% lower than it was on October 21st, so the implied gain is growing because the share price is falling. The target price is unchanged since October.

US Airways has a median target price of $10.00 and is trading today at $5.36, about -7.6% lower than the share price in late October. The implied gain is about 86.6%, and the target price is unchanged since October.

United Airlines has a median target price of $32.50 and is trading today at $19.94, yielding a potential upside of nearly 63%. The stock’s target price rose by $0.50 in the past six weeks, but the share price has fallen by about -1.4% in the same period.

Every one of the nine stocks we looked at has an implied gain of greater than 20%, proving once again that numbers often don’t tell the whole story. The only stock with a chance of offering investors some value is Alaska Air. But the chance is a very slim one.

Alaska Air’s median target price was raised from $80.00 to $83.00, and the share price has increased by about 5% since late October. It’s the only one of these nine to perform that combined feat. The stock’s potential upside is 22% and its forward P/E is 7.39. The company does not pay a dividend.

Alaska has ordered 15 new 737s from Boeing Co. (NYSE: BA) and deliveries are scheduled to begin in 2012. Thirteen of the new planes will be 737-900ERs, which carry a list price of $89.6 million each. That’s a total of about $1.2 billion, which is roughly equal to both the company’s long-term debt and to its available cash.

The company does not indicate how it will finance the purchase of these planes, but a recent report in the Financial Times indicates that European banks, the main lenders to global airlines, have cut back lending for commercial aircraft purchases. That means the airlines will have to issue debt or perhaps resort to leasing new planes.

The impact on aircraft makers like Boeing is likely to be greater than the impact on airlines, but what’s reasonably certain is that the cost of capital for aircraft is going to rise. For that reason, if for no other, investing in any airline stock now is a speculative play rather than a value play.

Paul Ausick

Filed under: Airlines, Analyst Calls, Bankruptcy, Transports Tagged: ALK, AMR, DAL, HA, JBLU, LCC, LUV, SAVE, UAL

AMR Bankruptcy, A Real Boon For Airlines (AMR, UAL, LCC, LUV, DAL, JBLU)

Administrator — Tue, 29 Nov 2011 15:51:18 +0000

The news flow around the AMR Corporation (NYSE: AMR) filing for bankruptcy is rampant. Some say it was expected and others believe it was premature. The aim to work its cost structure, but this action will kill the common shareholders.

It may seem odd, but the AMR bankruptcy is likely a boom for the likes of United Continental Holdings, Inc. (NYSE: UAL) and US Airways Group, Inc. (NYSE: LCC), which are up 6% and 10% respectively. Southwest Airlines Co. (NYSE: LUV) is up 0nly 1 penny at $7.88 and Delta Air Lines Inc. (NYSE: DAL) is up 3.6% at $7.70. Even JetBlue Airways Corporation (NASDAQ: JBLU) is catching a 5.7% pop higher.

All those bankruptcy rumors now turned out to be true. AMR has noted that it has $4.1 billion cash in the bank and also that it will honor all tickets and reservations for American and American Eagle Flights.

The market is telling you that shareholders will be left with nothing here. AMR’s stock is down 85% at $0.2311 and the new 52-week trading range is $0.80 to $8.89.

Gerard Arpey has also announced his decision to retire as Chairman and Chief Executive Officer. I wonder what his parachute has considering that this wipes out shareholders.

This move will allow other airlines to have a stronger negotiating position, it will also allow for potentially higher ticket prices, and more nickel-and-dime fees. If this wasn’t true you wouldn’t have the peers up as much as 10%.

Early this morning in the pre-market AMR’s stock was down about 60%. For it to slide further is a sing of doom heading the way of AMR. A bankruptcy stock down 60% indicated at least some chance of there being assets left over. A drop of almost 86% is a sign of a death sentence.

JON C. OGG

Filed under: Airlines, Bankruptcy, Corporate Governance, Economy, Law, Management Change, Transports Tagged: AMR, DAL, JBLU, LCC, LUV, UAL

Southwest, Oversold & Poised For Recovery Against Legacy Carriers (LUV, UAL, LCC, DAL, AMR, JBLU)

Administrator — Tue, 22 Nov 2011 13:20:23 +0000

Southwest Airlines Co. (NYSE: LUV) is now sometimes considered a discount carrier and sometimes considered a legacy carrier, but it still has among the most loyal customer base and it seems to be the most likely to remain profitable in good times and bad. The recent market turmoil has created a situation where Southwest shares have sold off too much. Perhaps way too much. Does that mean shares cannot slide further? No, but the current price is getting to be where the risk-reward parameters are more and more in the favor of long-term investors.

Another airline that is also cheap and oversold is United Continental Holdings, Inc. (NYSE: UAL), but it is expected to only have breakeven earnings in the March quarter while Southwest is expected to be profitable in the current December and the coming March quarters. Companies like US Airways Group, Inc. (NYSE: LCC) and Delta Air Lines Inc. (NYSE: DAL) are both expected to have an operating loss in at least one of the next two quarterly reports. The rumor mill also has many investors worried of a potential bankruptcy at AMR Corporation (NYSE: AMR). JetBlue Airways Corporation (NASDAQ: JBLU) is attractive on valuations as well, but its problems seem to keep working against it even if its Northeast-dominance leaves it more subject to adverse weather conditions than most rivals. This leaves Southwest as the best of class among the large air carriers even if these other stocks also look oversold on their charts.

Southwest remains the most passenger-friendly large air carrier in the sky. The company is also still digesting the acquisition of Airtran and it is now much more subject to the price of jet fuel that it was from 2006 to 2008. Shares sold off from $12 to $8 during the summer sell-off and shares went well under $8 during the peak selling in late-September and early October. After a recover, shares slid from $8.50 just about two weeks ago to end up at $7.73 most recently.

The airline still sports a relatively young fleet and it still has perhaps the best safety record despite some less than headline-friendly in the last few years. The company pays only a 0.2% dividend yield, but that is actually one of the few dividends in the airline sector. With what may be more predictable earnings than peers, we view Southwest as the one airline that wants to be dividend-friendly in the years ahead.

We would consider the current $12.21 consensus analyst target from Thomson Reuters now artificially high even if the 52-week trading range is $7.15 to $13.77 versus a $7.73 price today. In fact, that target price is high enough that we are even considering that analysts will lower their price targets ahead. The stock is now trading under its stated book value and it trades at only about 1.1-times tangible book value. And if it meets Thomson Reuters estimates, then the stock trades at 19-times 2011 and under 10-times 2012 expected earnings. Southwest should recover considerably unless the market tanks or unless an unforseen event occurs.

We would note, Southwest has what is close to a net-zero exposure to Europe. The only thing not in its favor is that hedging gasoline prices like it did in years past has been far less prevalent. The company also has a better labor situation compared to other airlines.

This was one of seven oversold picks poised for a comeback which was offered recently to our readers who sign up for our free daily newsletter service. Each morning’s free newsletter is sent by email and includes the top news headlines, shows the top 15 or so analyst upgrades and downgrades, covers activist investor and insider trading, and offer key trading alerts for investors. Sign up in the box below.

JON C. OGG

Filed under: Airlines, Transports, Value Investing Tagged: AMR, DAL, JBLU, LCC, LUV, UAL

Third Quarter 2011 Selected Financial/Operational Metrics For Major US Airlines

247wallst — Mon, 31 Oct 2011 08:09:25 +0000

Comments as noted:

Net profit/loss

UAL = $773M

DAL = $765M

ALK = $131M

LUV = $122M

LCC = $ 95M

JBLU = $ 38M

AMR = -($162M)

While most of the carriers have recently been reporting consistent quarterly profits, AMR continues their losing streak.

Operating income (more important to look at than net)

UAL = $1,055M

DAL = $1,030M

LUV = $ 247M

LCC = $ 193M

ALK = $ 145M

JBLU = $ 108M

AMR = $ 39M

Both United and Delta have begun taking advantage of their merger related synergies and now have significant -air fare- pricing power that is inherent with the industry consolidation.

Operating “margin”

ALK = 12.1%

DAL = 10.5%

UAL = 10.4%

JBLU = 9.0%

LUV = 5.7%

LCC = 5.6%

AMR = .6%

After accounting for the size of each carrier, Alaska continues to outperform the industry in margins.

Total (absolute) revenue (in millions)

UAL = $10,171

DAL = $ 9,816

AMR = $ 6,376

LUV = $ 4,311

LCC = $ 3,436

ALK = $ 1,198

JBLU = $ 1,195

United and Delta, due to their mergers with Continental and Northwest, have become the big gorillas of the industry. Combined revenues from just United and Continental now total more than the rest of the entire US airline industry (passenger airlines). United’s revenue alone is more than the total of Southwest, US Airways, Alaska, and JetBlue.

Regional/affiliate ratio of total passenger revenue

LCC = 26.0%

DAL = 20.0%

UAL = 19.7%

ALK = 19.4%

AMR = 13.2%

Excluding American, the large network carriers have grown their regional/affiliate networks thereby providing significant O&D revenue and passenger feed to mainline operations.

EBITDAR margin

ALK = 24.1%

JBLU = 16.7%

UAL = 16.0%

DAL = 15.3%

LCC = 12.2%

LUV = 8.4%

AMR = 7.4%

After excluding interest, taxes, depreciation/amortization, and aircraft rents, Alaska is by far, the financially strongest carrier with American being the weakest.

Wage benefit ratio of operating revenue / operating expense (mainline operations)

JBLU = 19.7% / 21.7%

DAL = 21.2% / 24.9%

LCC = 21.9% / 23.6%

UAL = 24.1% / 26.1%

LUV = 26.6% / 28.2%

ALK = 26.8% / 33.2%

AMR = 31.5% / 32.1%

Since 2007 and the upsurge in fuel costs going from approximately 10% of each airline’s operating costs to 30+%, labor has paid the price as most airline labor groups took huge concessions after 911.

Overall labor cost ratio differentials for the airline industry are largely affected by labor contract productivity work rules more so than (current) hourly pay rates.

Pilots from United, Delta, American, and US Airways are currently in contract negotiations and now earn approximately what they were back in the mid 1990′s and -unadjusted– for inflation.

Unit labor costs (wage & benefits cents per mile)(mainline operations)

JBLU = 2.39

LCC = 3.03

DAL = 3.12

LUV = 3.44

UAL = 3.49

ALK = 3.81

AMR = 4.03

While each airline has a unique operation from their competitors, the unit labor cost differential can but not always, play a large part of the overall profit/loss for each carrier. i.e., JetBlue and Alaska are similar size airlines which have the lowest and second highest unit labor costs but are still both profitable.

American’s labor costs consistently rank as the industry’s most expensive in large part because competing carriers were able to shed labor contract work rules via bankruptcy. While American’s hourly wage rates are more-or-less industry competitive, their work rules drive the industry’s lowest productivity.

Mainline system yield (cents/mile) / load factor

ALK = 14.70 / 87.0%

LUV = 14.69 / 82.0%

UAL = 14.56 / 86.1%

DAL = 14.32 / 86.9%

AMR = 14.21 / 84.9%

LCC = 13.76 / 86.5%

JBLU = 13.04 / 84.5%

Yield driven by high(er) load factors provides a significant indicator for an airline’s revenue performance and competitiveness.

Accepting the above, yield is affected by each airline’s “unique” operation. Fundamentals such as domestic/international, long/short haul, premium seating and global alliances all play a role in “yield” performance.

Data excludes ex/special items- Some data may be estimated

DAL = Delta

UAL = United

AMR = American

LCC = US Airways

LUV = Southwest

ALK = Alaska

JBLU = JetBlue

# # # #

Disclosure- The above opinions and comments should not be used to determine the worth of any stock or investment. At the time of writing, the author and his family did not hold stock and/or derivative positions in any of the airlines covered in this article.

_____________________________________________________________

Robert Herbst is an independent airline industry consultant. He is the founder of AirlineFinancials.com which provides airline industry analysis and commentary for major US carriers. In addition to his consulting work, Mr. Herbst was a commercial airline pilot for over 35 years. His aviation experience and financial background provide a unique analytical perspective into the airline industry.

Filed under: Airlines Tagged: ALK, AMR, DAL, JBLU, LCC, LUV, UAL