American Airlines
American Airlines recorded a $765 million net profit in the first quarter of 2016, down 24.9% from the first quarter of 2015. Revenue dropped 4.0% to $9.435 billion while increasing capacity by 3.6%. PRASM decreased 7.5% to 12.43 cents. In the first quarter, American welcomed 15 new mainline and 13 regional aircraft while retiring 22 aircraft.
Outlook
American Airlines is in good shape financially after posting another huge profit. However, there are some warning signs in American's first quarter earnings. PRASM and revenue both decreased in the first quarter, mostly due to competitive pressures and a weak Latin American market. Southwest has been putting pressure on American in Dallas by increasing the airline's number of daily departures by 15%. It doesn't help that Spirit has been steadily increasing capacity at DFW as well. To combat the threat of Spirit, American will launch a basic fare option in select markets later this year. Looking to the second quarter, American is expected to post another massive profit helped along by low fuel costs.
Delta Air Lines
Atlanta based Delta Airlines posted a $946 million dollar profit in the first quarter of 2016, up 27% from the same period in 2015. Delta was boosted by a 40% year-over-year dive in fuel costs. The results weren't all pretty as Delta saw its revenue decrease by $137 million dollars from the 1st quarter of 2015 to $9 billion. PRASM also decreased 4.6%.
Outlook
Delta had a very strong 1st quarter headlined by huge profit growth over the first quarter of 2015. While extremely low fuel prices are more than making up for the decreases in revenue and PRASM, which are being driven by a turf war in Seattle with Alaska Airlines and increased competition with LCCs and foreign currency pressures, these could be causes for concern in the coming years if oil prices ever rise. For the 2nd quarter of 2016, Delta is poised to post another monster profit primarily driven by another massive decrease in fuel costs compared to the 2nd quarter of last year. Delta is forecasting PRASM to decrease 2.5%-4.5% in the 2nd quarter while increasing capacity 2%-3%
United Airlines
United Airlines posted a $435 million net profit in the first quarter of 2016, excluding special items, spurred by a 34.7% decrease in fuel costs. Joining the other two legacy carriers, United's revenue decreased 4.8% from the same period in 2015 to $8.2 billion and PRASM decreased 7.4% from 2015.
Outlook
Based on its 1st quarter results, United is doing very well. While, like most airlines in the U.S., United is seeing decreases in revenue and PRASM as competition ramps up, the carrier is also facing unique organizational issues ranging from boardroom battles to horrid on time numbers. However, things are looking up for United. In the first quarter, United's mainline on time arrival improved by 14 points. The airline also resolved its board room spat in March. With Munoz back at the helm of the Chicago based airline, United looks to be on a good path heading forward.
Southwest Airlines
Southwest Airlines posted a $567 million profit in the first quarter of 2016, a first quarter record for the company. While Southwest's profit was up 25.7% year-over-year and operating revenue increased 9.3%, PRASM decreased 3.6%.
Outlook
Southwest's first quarter earnings were strong, helped by a $25 million dollar decrease in fuel costs. Southwest increased capacity by an incredible 9.2% followed up by an 80.5% load factor, a first quarter record. While the other legacies are stressing capacity discipline, Southwest is barging ahead and placing pressure on the legacies in key markets while posting record profits. Look for much of the same in the second quarter.
JetBlue
JetBlue posted a $199 million first quarter profit in the first quarter of 2016, up 32% from the first quarter of 2015. Operating revenues were $1.6 billion with PRASM decreasing 8.0%. JetBlue increased capacity by 14.1% with the airline's first quarter load factor decreasing 0.1% to 84.2%.
Outlook
JetBlue had a strong first quarter thanks to a 43% year-over-year decrease in fuel expenses. JetBlue is expecting another big profit in the 2nd quarter of 2016 while increasing capacity in the range of 9.5%-11.5%
Alaska Airlines
Seattle based Alaska Airlines reported a record $183 million dollar profit in the first quarter of 2016, up 23% year-over-year. Operating revenues increased 6% to $1.3 billion while PRASM decreased 7.7% compared to the same period of last year. Alaska increased capacity 12.9% year-over-year while load factor decreased to 82% from 83.4% in 2015.
Outlook
The big story for Alaska Airlines coming out of the first quarter was its $2.6 billion merger with Vrigin America. The deal is still awaiting regulatory approval. The acquisition of Virgin America will strengthen Alaska's standing on the west coast, especially in California, even as the airline battles Delta in Seattle. Alaska's first quarter results show that as long as fuel prices remain low, Alaska will be able to effectively neutralize the Delta threat in Seattle by increasing capacity without having any effect on profit. Look for another big profit from Alaska in the second quarter.
Virgin America
Virgin America recorded a an $18.4 million profit in the first quarter of 2016, up 74.5% from the same period in 2015. Operating revenue increased 11.5% year-over-year to $364 million while PRASM decreased 3.8%. Virgin America increased capacity by 15.8% in the first quarter.
Outlook
For Virgin America it was a good run. The airline was launched in 2007 and turned its first profit just last year. With heavy competition and little room for growth in the U.S. domestic market, Virgin America was able to command a hefty premium. Alaska Airlines and Virgin America are expected to receive regulatory approval for the merger by January 1st, 2017.
Spirit
Spirit Airlines reported a $61.9 million net profit in the first quarter of 2016, down 11.4% year-over-year. The ULCC increased capacity 26.5% year-over-year while load factor decreased .2% to 84.7%. Operating revenue increased 9% to $538 million year-over-year while TRASM, another measure of unit revenue, decreased 13.8%
Outlook
Spirit had a strong first quarter, which is generally the weakest of the year, especially for airline's such as Spirit that rely on leisure travelers. Spirit has rapidly been increasing capacity, challenging the legacies in strongholds such as Houston and O'Hare. As a result, TRASM has suffered while operating expenses increased 13% even as fuel costs dove 24%. Looking ahead to the second quarter, Spirit will continue its high growth strategy.
Allegiant
Allegiant posted a $71.9 million net profit in the first quarter, up 9% from the same period last year. Operating revenue increased 5.5% to $348 million driven by a 12.5% growth in ancillary revenues. Allegiant increased capacity 28.8% while load factor decreased 2.3% to 85.7%. TRASM decreased 10.5%.
Outlook
Allegiant, like the other ULCCs in the U.S., is pursuing a high growth strategy. Allegiant recently entered into larger markets such as Cincinnati and Baltimore signaling a new direction for the airline now focused on connecting larger markets to leisure destinations. Unlike Spirit and Frontier, Allegiant's route map does not overlap with the legacy carriers allowing Allegiant to post fat margins. As the summer travel season begins to ramp up in the second quarter, look for more growth and bigger profits.
Air Canada
Air Canada reported a $101 million Canadian dollar net profit in the first quarter of 2016, up from a $309 million Canadian dollar loss in the same period of 2015. Revenue was $3.3 billion Canadian dollars, up from a $3.2 billion Canadian dollars in 2015. PRASM decreased 5.1% while load factor decreased .3% to 81.1%.
Outlook
Air Canada had a mediocre first quarter. Even though the Canadian flag carrier turned a profit in the first quarter, it was mostly due to a 26.7% decrease in fuel expenses. Air Canada's 4.6% operating margin, which was down 1.6% year-over-year, is certainly worrisome. As long as oil prices remain low, Air Canada will be able to slip by with slim profits even as the weak Canadian dollar suffers. Look for much of the same in the second quarter as the Canadian Dollar is expected to weaken even more.
WestJet
Canadian low cost carrier WestJet posted an $87.6 million dollar profit in the first quarter of 2016, down 37.7% from the first quarter of last year.It was WestJet's 44th consecutive quarter of profitability. Revenue decreased 4.8% to $1.03 billion with RASM (another measurement of unit revenue similar to PRASM) dropping 11.0%.
Outlook
It's not looking too good for WestJet. Like Air Canada, WestJet is facing sinking demand as the Canadian Dollar continues to weaken. There are multiple areas of concern from WestJet's operating margin decreasing from 18.2% to 12% year-over-year to its net profit falling 37% even as fuel costs decreased 27.7%. WestJet is trying to get out of this funk by cutting domestic capacity by 1%-1.5% while entering new international markets such as London, which WestJet began flying to from Toronto earlier in May. In the second quarter we'll see if this strategy is working.
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