Six of the major U.S. airlines, namely United Continental (NYSE:UAL), Delta (NYSE:DAL), Southwest (NYSE:LUV), US Airways (NYSE:LCC), JetBlue (NASDAQ:JBLU) and Alaska Airways (NYSE:ALK), have posted impressive numbers in the first-half of 2012. The combined operating revenue for these carriers was $57.05 billion in H1 2012, up 8% on a year-over-year basis; combined operating income was $2.17 billion in the same period, also up 8% y-o-y; and combined net income was $719.30 million, up 50% y-o-y.      
These figures clearly reflect that overall demand for flights was stable in the first-half of 2012, and that these airlines successfully managed high jet fuel prices during first quarter of 2012 by means of fare hikes and efficient management of non-fuel costs. They also benefited from relatively lower fuel prices during second quarter of 2012.
- Here’s Why We Have Revised United Continental’s Price Estimate To $52 Per Share
- How Will Lower Fuel Costs Impact The Aircraft Re-Fleeting Program Of Large US Airlines?
- How Have Mergers And Acquisitions Led To The Consolidation Of The US Airline Industry Over The Last Decade?
- Lower PRASM And Higher Tax Bill Caused United Continental’s 1Q’16 Earnings To Drop Despite Huge Fuel Cost Savings
- Currency Headwinds To Offset United Continental’s Fuel Cost Savings For 1Q’16
- How Will United’s Equity Value Be Impacted If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
Domestic, Latin and Pacific Routes Strong, Atlantic Weaker
Operating revenue increased for each of these six airlines in H1 2012, compared to the corresponding period in 2011.
Southwest posted the largest increase of 19%, followed by JetBlue at 15%, and the remaining players posting single-digit increases. This reflects the fact that demand for flights has remained stable over the first-half of this year. On a deeper analysis on a route-wise basis, it becomes evident that passenger traffic has increased on domestic, and Latin America and Pacific international routes, and declined on Atlantic international routes, which points to the economic slowdown in Europe. And the increase in demand for flights on Latin and Pacific international routes reflects the high economic growth of these regions.
United Feels The Pinch
Operating income and net income also increased for each of these airlines, except United Continental, which posted an operating income of $304 million in H1 2012, compared to $842 million in year-ago period, and a net loss of 109 million in H1 2012, compared to a net profit of 325 million in H1 2011.
In United Continental case’s, its operating income and net income was impacted due to three reasons. First, integration costs related to the merger between United and Continental. The carrier sustained integration costs of $271 million in the first-half of 2012. Second, fuel hedging losses in Q2 2012 that prevented the airline from fully realizing the benefit of a decline in jet-fuel prices during the period. And third, slower growth in passenger revenues in H1 2012 compared to other airlines. This was primarily because passenger revenues for United Continental declined on Latin American routes, as low-cost carriers increased their focus on these routes post receiving the required approvals and took market share from it.
Nonetheless, the improvement in operating income and net income of other five carriers in the first-half of 2012 reflects that these carriers successfully managed the high fuel prices of the first quarter of 2012 through passenger fare hikes and good operational management, and benefited from a decline in fuel prices in the second quarter of 2012.
All in all, U.S airlines have posted a good first-half of 2012 and these figures back the claim.Notes:
- Southwest Airlines Reports Second Quarter Results, July 19 2012, www.swamedia.com [↩]
- Delta Announces June Quarter Financial Results, July 25 2012, news.delta.com [↩]
- United Announces Second-Quarter 2012 Profit, July 26 2012, www.unitedcontinentalholdings.com [↩]
- JetBlue Announces Second Quarter Results, July 24 2012, investor.jetblue.com [↩]
- 10-Q Q2 SEC filing, www.alaskaair.com [↩]
- US Airways Reports Highest Quarterly Profit In Company History, July 25 2012, www.usairways.com [↩]