North American airlines are performing better than their peers
from other regions. Over the past three months, the carriers are
improving their profitability on the back of falling fuel costs and
growing business travel demand.
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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The major carriers are adding novel features to their services and
introducing products that are contributing to the rise in air
traffic, thereby leading to increased profits. We are already
seeing evidences of these positives in a pronounced uptrend in
earnings estimates for the U.S. carriers.
Airline traffic is customarily measured in billions of revenue
passenger miles (RPM), which imply revenue generated per mile per
Consolidated June traffic inched up 0.1% at the largest U.S.
United Continental Holdings Inc.
). Growth of 1.9% in international traffic was partially offset by
weak domestic traffic (down 1.9%). Capacity (or available seat
miles) slid 0.3% year over year while load factor (percentage of
seats filled with passengers) grew 40 basis points (bps) year over
year to 86.5%. United Continental expects 5-6% year-over-year
increase in unit revenue for the month of June, measured by
passenger revenue per available seat mile (PRASM), a key metric in
This is starting to show in improving expectations for the
company's profitability. Last month, the Zacks Consensus estimates
for UAL went up by 48 cents to $4.53 and 22 cents to $6.09 for 2012
and 2013, respectively. Notably, the Zacks Consensus estimates for
this year and next were $4.06 and $5.44 three months back.
The June traffic for the second largest U.S. airline
Delta Air Lines
) increased 0.4% year over year on growing business travel demand
and flight expansion in the New York market. Consolidated capacity
fell 1.7% while the load factor improved 180 bps to 88.1%. Domestic
traffic grew 0.9% year over year on a 120 bp expansion in load
factor, which partly offset capacity reduction of 0.5%.
International traffic slid 0.3% year over year due to a 3.3%
decline in capacity that partially offset a 260 bp growth in load
factor. The company's PRASM increased 8% year over year for June.
Like UAL, earnings expectations for Delta have also been trending
up lately. The current Zacks Consensus estimates of $2.40 and $3.03
for 2012 and 2013 are up from $2.28 and $2.87 a month ago,
respectively. Earnings estimates for this year and the next were
$2.32 and $2.56, respectively, three months back.
The low-cost carrier
Southwest Airlines Co
) recorded a slight year-over-year drop of 0.1% in June traffic on
a capacity decrease of 0.7% that fully offset the improvement of 50
bps in load factor. The company expects PRASM to increase 6% year
over year for June. However, earnings estimates are moving up as
falling fuel expenses are offsetting the carrier's traffic woes.
The Zacks Consensus estimates for this year and the next have
increased by a nickel (to 80 cents) and by 4 cents (to $1.09) in
the past one month.
The discounted U.S. airline
JetBlue Airways Corporation
) reported a 9.7% year-over-year traffic increase in June. On a
year-over-year basis, capacity rose 4.8% and load factor grew 380
bps to 85.9%. Traffic at
Alaska Air Group Inc.
) also climbed 10.3% year over year, the highest compared to its
rivals, in the month of June. Both capacity and load factor rose
7.4% and 230 bps, respectively, year over year. As a result,
earnings estimates for both carriers are nicely up since the past
Over the past one month, the Zacks Consensus Estimates for JetBlue
increased 2 cents to 55 cents for 2012 and a penny to 69 cents for
2013. Similarly, earnings estimates for Alaska are pegged at $4.83
and $5.44 for this year and the next, respectively. These estimates
are also trending upwards over the last one month.
The month's traffic for
US Airways Group Inc.
) grew 1.7% year over year on strong capacity, which improved 2.3%
from the year-ago month. Load factor however contracted 60 bps year
over year. The earnings estimates for LCC have risen strongly of
late, with current EPS estimates of $3.14 and $3.70 for this year
and the next, strongly up 54 cents and 40 cents, respectively, over
the past one month.
For the short term (1-3 months), Delta, Southwest, JetBlue and
Alaska hold the Zacks # 2 (Buy) Rank while United Continental and
US Airways retain the Zacks #1 (Strong Buy) Rank.