A Three-Year Look At Airlines

Three-Year History of Ten Key Metrics for Major US Airlines:
(For this analysis United/Continental data is pro forma)
Operating Revenue (total of eight airlines)
2008 = $126.2 billion
2009 = $106.7 billion
2010 = $122.2 billion
When comparing 2010 with 2009, every airline had an increase in operating revenue. In general, the larger the airline, the larger the increase in revenue.
Operating Income/Loss and Margins (total of eight airlines)
2008 = $4.33 billion
2009 = +$662 million
2010 = +$8.54 billion
Operating income is the difference between total operating revenue and operating expenses. Note: For this analysis, recognized one-time and special charges were removed from operating expenses.
2010 was the first year since 2007 that every airline had positive operating income. Delta had the highest operating income at $3 billion.
Southwest and JetBlue were the only two airlines to have positive operating income for the last three years.
Net Long-Term Debt (total of eight airlines)
2008 = $32.08 billion (25.4% of total operating revenue)
2009 = $30.07 billion (28.2% of total operating revenue)
2010 = $22.02 billion (18.0% of total operating revenue)
2010 Net Long-Term Debt compared to year 2009, was reduced significantly for the largest airlines. As a ratio of total operating revenue, Net LT Debt for the industry decreased by 36% over year 2009. For this analysis, Net Long-Term Debt is LT-Debt less current maturities plus capital leases less cash and equivalents.
Cash Liquidity (total of eight airlines)
2008 = $17.3 billion (13.2% of total operating expenses)
2009 = $21.9 billion (20.7% of total operating expenses)
2010 = $24.8 billion (21.8% of total operating expenses)
Cash liquidity for 2010 compared with 2009 increased significantly for United and Southwest and decreased significantly for JetBlue and Air Tran. For this analysis, cash includes unrestricted cash and short-term investments.
Stock Market Capitalization (total of eight airlines)
2008 = $25.1 billion (Q4 median)
2009 = $25 billion (Q4 median)
2010 = $38.4 billion (Q4 median)
Market capitalization is the Q4 median stock-share price times the outstanding shares. Delta, Southwest and United have significantly higher market caps than all of the other airlines. Every airline had a 2010 year-over-year increase in market cap.
Market Share of Passenger Miles (total of eight airlines, includes regional affiliates)
2008 = 768.6 billion passenger miles
2009 = 730.7 billion passenger miles
2010 = 756.3 billion passenger miles
Each airline’s percentage of 2010 passenger traffic was little changed when compared with 2009.
Regional Affiliate Impact to Market Share (total of five airlines)
2008 = 68.8 billion (regional affiliate passenger miles)
2009 = 69 billion (regional affiliate passenger miles)
2010 = 72.8 billion (regional affiliate passenger miles)
There was very little year-over-year change in total regional/affiliate passenger traffic miles.
For 2010, excluding American, the other four airlines with regional/affiliate partners all increased net market share after including their regional/affiliate traffic.
EBITDAR and Margin (total of eight airlines)
2008 = $5.5 billion
2009 = $9.7 billion
2010 = $16.9 billion
EBITDAR is a recognized financial term used to measure a corporation’s operating earnings before including interest, taxes, depreciation, amortization, and aircraft rent. The chart above shows the EBITDAR ratio of operating revenue for each airline.
Delta and American were the only two airlines to increase EBITDAR margins over 2009.
Interest Expense (total of eight airlines)
2008 = $2.48 billion
2009 = $3.16 billion
2010 = $3.50 billion
Interest expense has increased each of the last three years for the large legacy carriers.
Advance Ticket Sales – (total of eight airlines)-
2008 = $16.3 billion (14.4% of 2008 passenger revenue)
2009 = $15.9 billion (16.8% of 2009 passenger revenue)
2010 = $17.5 billion (16.3% of 2010 passenger revenue)
Each quarter, airlines report the amount of passenger revenue collected for future travel (ATL). The following chart shows each airline’s Air Traffic Liability as a percentage of the previous 12 months’ passenger revenue. For this analysis, FF miles expected to be used in the next 12 months may be included as ATL.

Year ending 2010 data suggests the larger legacy airlines have higher future passenger bookings than the smaller carriers. Strong advance bookings should push air fare yields and revenues higher in 2011 than they were in 2010.
Conclusion- For year 2011, it is the opinion of that all airlines noted above will see double digit year-over-year increases in top line revenues.
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Disclosure- The above opinions and comments should not be used to determine the worth of any stock or investment.

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