While prospects for the U.S. airlines industry are not exactly bleak, it is fair to say that those prospects may be getting a dose of reality. Two of the country’s largest low-cost carriers both reported that revenues may be flat or worse for the current quarter.
JetBlue Airways Corp. (NASDAQ: JBLU) announced Tuesday morning that it now estimates that February revenue per available seat mile (RASM) decreased by 10.0% to 10.5%. The airline now expects year-over-year RASM to fall by 7% to 8% for the first quarter of 2016. In its announcement, JetBlue said that “load factors remain solid, [but] yields are lower.” In other words, we can fill the seats but we’re not getting paid enough for them, either through fares or added fees.
Southwest Airlines Co. (NYSE: LUV) also announced February data Tuesday morning. The company said that it flew a billion more miles than in February 2015 but that its load factor dropped from 79.9% last year to 79.0% this year. Southwest now estimates RASM for the first quarter to be in line with the same period a year ago. The airlines also noted that capacity rose by 14.7% year over year.
While JetBlue laid some of the blame for the weak February results on a tough comparison with 2015 results, the airline also admitted that capacity rose by 19.6% year over year. Flying empty seats from point A to point B is a sure-fire way to cut RASM.
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