Airlines Week In Review: American, United, Southwest, JetBlue Announce Traffic Results For March

Over the last week, American (NASDAQ: AAL), United (NYSE: UAL), Southwest (NYSE: LUV), and JetBlue (NASDAQ: JBLU) announced their traffic results for the month of March and year-to-date 2015. While American and United slashed their flying capacity during the quarter, Southwest and JetBlue continued to expand their capacity at a high rate, contributing to their unit revenue. The unit revenue for American and United, however, fell due to currency fluctuations.

American Airlines

American’s total capacity declined over the last two months, resulting in a fall of almost 1% during the first quarter of 2015. In tandem, the airline’s passenger traffic dropped 0.6% in March and 1.4% during the quarter. Consequently, the company expects its first quarter unit revenue (passenger revenue per available seat mile (PRASM)) to dip by 1-3%. Further, the airline estimates its first quarter pretax margins excluding special charges to be 12-13% as opposed to 12-14%, indicated in its previous guidance. This is due to higher than anticipated foreign exchange losses attributable to the strengthening of the US dollar.

American has also reduced its guidance for capacity growth in 2015 from 2-3% to only 2% on a year-on-year basis. The full year domestic capacity is expected to increase 2-3%, while the international capacity is expected to grow at around 1% in 2015. The airline estimates its mainline jet fuel cost to be $1.80-1.85 per gallon for the first quarter. American expects to invest over $4 billion on re-fleeting its aircraft, as the airline expects the delivery of 75 mainline aircraft, and plans to retire 103 aircraft during the year ^[1]. Despite the pressure from the decline in passenger traffic, we expect American’s margins for the first quarter to remain strong on the back of low crude oil prices. The airline will report the first quarter operating results on 22nd April 2015.

– We currently have a price estimate of $54 per share for American, 13% ahead of its current market price.

– We estimate American will post revenue of about $43.8 billion in 2015, compared to its consensus revenue of $43.1 billion.

See our complete analysis of American here

United Continental

Similar to its counterpart American, United’s passenger traffic also fell close to 1% year-on-year in March, owing to a decline of 0.6% year-on-year in the carrier’s flying capacity. However, the passenger traffic and the flying capacity for the first quarter remained flat. We expect that this restrained capacity addition by American and United to be beneficial for the overall airline industry, as it will prevent an oversupply of seats in the market. (Restrained Capacity Addition Is Key To Sustaining Airline Industry Profits)

The airline’s unit revenue fell 1.5% during the first quarter primarily because of the currency fluctuations. United expects its pre-tax margin excluding special charges to be 6-7%. United has budgeted a capital expenditure of $755-775 million for the first quarter, lower than its previous guidance owing to a delay in some non-aircraft projects.  The company spent approximately $200 million on the repurchase shares of common stock during the quarter ^[2]. The airline plans to report its operating results for the first quarter on 22nd April 2015.

– We currently have a price estimate of $69 for United, 12% ahead of its current market price.

– We estimate United will post revenue of $40 billion in 2015, compared to its consensus revenue of $39.2 billion.

See our complete analysis of United here

Southwest Airlines

Southwest reported an increase of 4.4% in its flying capacity during March, and a consolidated increase of 6% during the first quarter. This rapid capacity addition by the low cost carrier led to a 5.5% increase in its passenger traffic during the quarter. Consequently, the airline’s load factor (occupancy rate) increased to 84.5% in March as compared to 82.7% a year ago.  In addition, Southwest’s unit revenue improved by 1% year-on-year during the month ^[3]. Given the capacity expansions and steady increase in passenger traffic, we expect the airline to post strong first quarter results on 23rd April 2015.

– We currently have a price estimate of $48 for Southwest, 10% ahead of its current market price.

– We estimate Southwest will post revenue of $20 billion in 2015, compared to its consensus revenue of $19.6 billion.

See our complete analysis of Southwest here

JetBlue Airlines

Keeping pace with its fellow low-cost carrier Southwest, JetBlue increased its flying capacity by more than 6% in March and over 9.5% during the first quarter. As a result, its passenger traffic rose by 9.2% during the month, aggregating to an increase of greater than 11% during the quarter. The airline’s load factor for March improved to 87.2%, an increase of 2.4% from last year.

JetBlue’s unit revenue also grew 8% year-on-year in March. Hence, the airline expects to record a growth of 4.5% during the first quarter, higher than its previous guidance of 3-4% increase for the quarter ^[4]. Accordingly, we expect the airline to report impressive results on the back of strong growth in unit revenue and passenger traffic. The airline is expected to announce its first quarter operating results on 22nd April 2015.

– We currently have a price estimate of $18 for JetBlue, almost 5% below its current market price.

– We estimate JetBlue will post revenue of $6.4 billion in 2015, compared to its consensus revenue of $6.3 billion.

See our complete analysis of JetBlue here

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research

1. American Reports March Traffic Results, 10th April 2015, www.aa.com [↩]
2. United Reports March Traffic Results, 9th April 2015, www.unitedcontinentalholdings.com [↩]
3. Southwest Reports March Traffic Results, 9th April 2015, www.southwest.com [↩]
4. JetBlue Reports March Traffic Results, 10th April 2015, www.jetblue.com [↩]