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ANALYSIS: August 2014 Traffic Reports for US Airlines a Mixed Bag

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ANALYSIS: August 2014 Traffic Reports for US Airlines a Mixed Bag

ANALYSIS: August 2014 Traffic Reports for US Airlines a Mixed Bag
September 15
07:57 2014

MIAMI — US airlines have released their traffic reports for August 2014reporting figures ranging from excellent to mediocre. The following table provides a brief summary of the headline traffic figures, with additional analysis and observations below.

Image Credit - Vinay Bhaskara / Airways News

(Credits: Vinay Bhaskara)

The major news to come out of August traffic figures was mediocre growth in passenger revenue per available seat mile (PRASM) figures from American and Delta, both of whom reported at or near 2.0%. The numbers pushed down the stock price of both airlines, and stoked concerns of a slowdown in airline fortunes. However such concerns are probably overblown. Both Delta and American suffer from difficult YOY comparisons with last year’s third quarter (in particular due to record revenues for pre-merger US Airway)s. Moreover, fuel prices are reasonably stable, and per-ASM costs are improving for both airlines thanks to the elimination of 50-seat regional jets (RJs) and general fleet replacement. Third quarter financial results for both carriers will be fine.

In terms of the non-revenue figures above, Delta’s numbers are in line with expectations, though the high ASM and RPM growth relative to peers is in large part due to the expansion of Seattle service to Asia. United continues with its slavish devotion to capacity discipline (though it is finally beginning to replace RJs on some key business routes). Capacity growth outpaced traffic growth at American, but that can largely be tacked up to international expansion from Charlotte (in particular the trans-Atlantic flights). The Charlotte international announcements happened last year amidst the merger battle with the Department of Justice (DOJ), and while they served their purpose politically, they were never going to work at the new American’s higher cost structure.

Southwest had another strong month of traffic growth as strong demand growth paired with a culling of resources in preparation for the expansion of service at Dallas Love Field next month to generate a large differential. JetBlue and Hawaiian both had reasonable figures, though it is clear that Hawaiian is trying to push up revenues at the expense of traffic growth (not a bad tradeoff). We are skeptical of Alaska’s capacity growth in the face of expansion by Delta, and while one month in isolation is not an awful sign, traffic growth lower than capacity growth is not a good long term trend for the highly profitable airline. For Spirit and Allegiant, growth continues apace, and even with the  growth of a true rival in Frontier Airlines, the ultra-low cost carrier space still has plenty of room to run.



About Author

Vinay Bhaskara

Vinay Bhaskara

Senior Business Analyst, Big Airline Enthusiast, Avid Airport Connoisseur, Frequent Flyer, Globetrotter. I Miss Northwest Airlines Every Day. @TheABVinay

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