Airlines' struggle with rising fuel costs and weak business
travel demand are leading to lower traffic and profits. Though fare
hikes helped some U.S. air carriers to somewhat manage September
traffic in green, the earnings estimates are still trending
downward on the back of numerous macroeconomic headwinds. Notably,
some low cost carriers once again emerged as the winners in
September based on their low fares.
ALASKA AIR GRP (ALK): Free Stock Analysis
DELTA AIR LINES (DAL): Free Stock Analysis
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
US AIRWAYS GRP (LCC): Free Stock Analysis
SOUTHWEST AIR (LUV): Free Stock Analysis Report
UNITED CONT HLD (UAL): Free Stock Analysis
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Airline traffic is customarily measured in billions of revenue
passenger miles (RPM), which imply revenue generated per mile per
Consolidated September traffic fell 2.1% at the largest U.S.
United Continental Holdings Inc.
), due to weak domestic and international traffic. Capacity (or
available seat miles) slid 1.3% year over year while load factor
(percentage of seats filled with passengers) contracted 70 basis
points (bps) year over year to 82.1%. United Continental expects
unit revenue to decline 2.5-3.5% year over year for the month of
September, measured by passenger revenue per available seat mile
(PRASM), a key metric in airlines.
In addition, the weak traffic is denting the company's
profitability projections. In the last one month, the Zacks
Consensus estimates for UAL went down by 47 cents to $2.43 and by
39 cents to $4.26 for 2012 and 2013, respectively. Notably, the
Zacks Consensus Estimates for this year and the next were $2.90 and
$4.65, respectively, one month back.
The September traffic for the second largest U.S. airline
Delta Air Lines Inc.
) fell 1.1% year over year, as weak domestic traffic offset the
strong international traffic. Consolidated capacity slid 0.6% while
load factor was down a modest 40 bps to 83.2%. The company's PRASM
increased 0.5% year over year for September. Like UAL, earnings
expectations for Delta have also been trending down. The current
Zacks Consensus Estimates of $1.91 and $2.50 for 2012 and 2013 are
down from $2.07 and $2.67 a month ago, respectively.
Traffic for the low-cost carrier
Southwest Airlines Co
) also nudged down 2.1% year over year in September on the back of
1% drop in capacity and 80 bps fall in load factor. The company
expects PRASM to increase 2-3% year over year for September. The
Zacks Consensus Estimates for this year and the next have decreased
by 10 cents to 63 cents and by 7 cents to $0.94, respectively, in
the past one month.
The discounted U.S. airline
JetBlue Airways Corporation
) reported a 6.1% year-over-year traffic increase in September, the
highest compared to its rivals. On a year-over-year basis, capacity
rose 7.7% and load factor declined 120 bps to 78.6%. Despite the
solid growth in traffic, earnings estimates for JetBlue are
substantially down from the last month. The Zacks Consensus
Estimates fell by a nickel to 46 cents for 2012 and 4 cents to 60
cents for 2013.
Alaska Air Group Inc.
) also climbed 5.1% year over year in the month of September.
Capacity grew 5.1% while load factor was flat year over year. Like
other airlines, earnings estimates for the company dropped for 2012
and 2013 over the past one month. The earnings estimates for Alaska
are pegged at $4.76 and $5.30 for this year and the next,
The month's traffic for
US Airways Group Inc.
) increased 1.8% year over year on a 0.9% capacity growth and load
factor expanded 80 bps to 84.4%. The earnings estimates for LCC
have fallen significantly, with EPS estimates currently being $2.33
and $2.91 for this year and the next, down from $2.63 and $3.22,
respectively, over the past one month.
Both United Continental and Delta currently hold a Zacks #5 (Strong
Sell) Rank, while Alaska retains Zacks # 4 (Sell) Rank for the
short term (1-3 months). The other airlines - Southwest, JetBlue
and US Airways retain a Zacks #3 (Hold) Rank.