January Traffic Stalls at Two Airlines
Both Southwest Airlines and American Airlines reported January traffic numbers Monday morning, and investors are less than enthusiastic.
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Both Southwest Airlines Co. (NYSE: LUV) and American Airlines Group Inc. (NASDAQ: AAL) reported January traffic numbers Monday morning, and investors are less than enthusiastic.
Southwest’s revenue passenger miles rose 8.6% compared with January 2014 and available seat miles rose 10.2%. But to entice those passengers to take advantage of the additional capacity the passenger revenue per available seat mile (PRASM) fell about 1%. Southwest reported PRASM in the fourth quarter of 2014 of $0.135 and costs per available seat mile of $0.127, so there is not a lot of headroom for higher costs or lower passenger revenue.
At American Airlines, total available seat miles fell 0.2% and revenue passenger miles fell by 2.8%. Based on one month of data and its own forecast for the remaining two months of the first quarter, American expects PRASM to fall by 2% to 4% in the first quarter. In the fourth quarter of 2014, American’s PRASM was also $0.135, but its costs per available seat mile was $0.143. American’s total revenue per mile rose to $0.1562.
American is also forecasting fuel costs at $0.10 per gallon higher than previous guidance, up from a range of $1.71 to $1.76 to a new range of $1.81 to $1.86 per gallon. The company now expects adjusted pretax margin in the first quarter to decline from a prior estimated range of 13% to 15% to a new range of 12% to 14%.
It is no surprise that both airline stocks traded even lower than the major indexes Monday morning. Southwest traded down about 1.9%, at $43.30 in a 52-week range of $20.88 to $47.17.
American’s stock traded down about 3.5%, at $46.45 in a 52-week range of $28.10 to $56.20.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.
