Tuesday, May 4, 2010

First Quarter 2010 U.S. Airline Financials

Sometimes in the airline industry we encounter a quarter that gives an accurate snapshot of where each carrier is in the current environment. The first quarter of 2010 did just that. On the positive side, total revenue and revenue per available seat mile (RASM) has continued a healthy climb through the quarter. Capacity (ASM's) has continued to remain in check producing the healthy revenue picture. On the downside, oil prices spiked to an average of $78 per barrel in the quarter compared to the $40 range a year earlier. There were also revenue losses from the severe snow events during the period. To sum it up, if not for good capacity control leading to higher fare levels and the economic recovery, then higher energy prices and of course the weather would have produced a more dismal outcome. Another interesting observation during the quarter was evidence of legacy cost reduction by those carriers who took advantage of the bankruptcy process during the last decade or earlier. The bankruptcy participants: United (one filing), Delta (one filing), US Airways (two filings), and Continental (two filings - 1982 and 1990), all have seen core legacy expense reduced substantially. Compare those results to American who did not participate in the bankruptcy process. American is in a tough spot. While cash balance (for now) is adaquate, its overall cost structure is on the high side. It still has substantial pension liability and is highly leveraged. It requires high fares and low oil prices just to approach break-even, let alone make an acceptable profit to pay down debt and remain competitive. American is also in tense contract negotiations with it's unions as they seek (and rightfully so) a fair return on concessions given during the last several years. American is expected to produce losses for the remainder of 2010, while the rest of the industry is expected to return to the black. Assuming that oil prices remain at the current level or lower, and the economy continues it's climb, we should see healthy results for the remainder of 2010. Finally, a true recovery may be at hand.



Q1 2010 FINANCIAL RESULTS:
  • DELTA: Revenue=$6.8 billion (+2.0%), Net Loss=$266.0 million
  • AMERICAN: Revenue=$5.1 billion (+4.7%), Net Loss=$505.0 million
  • UNITED: Revenue=$4.2 billion (+15.0%), Net Loss=$92.0 million
  • CONTINENTAL: Revenue=$3.2 billion (+7.0%), Net Loss=$146.0 million
  • SOUTHWEST: Revenue=$2.6 billion (+11.6%), Net Profit=$11.0 million
  • US AIRWAYS: Revenue=$2.6 billion (+7.9%), Net Loss=$45.0 million
  • JETBLUE: Revenue=$870 million (+10.0%), Net Loss=$1.0 million
  • ALASKA: Revenue=$830 million (+8.0%), Net Profit=$13.0 million
  • SKYWEST/ASA: Revenue=$632.2 million (-9.3%), Net Profit=$15.0 million
  • REPUBLIC: Revenue=$608 million (+87.0%), Net Loss=$36.0 million
  • AIRTRAN: Revenue=$605 million (+11.7%), Net Loss=$12.0 million
  • HAWAIIAN: Revenue=$298.0 million (+9.0%), Net Profit=$216,000
  • PINNACLE: Revenue=$208.0 million (+0.9%), Net Profit=$1.7 million
  • EXPRESSJET: Revenue=$189.2 million (+11.5%), Net Loss=$16.1 million
  • ALLEGIANT: Revenue=$169.6 million (+19.4%), Net Profit=$22.6 million

*Net amounts include extraordinary items, all figures obtained from wire reports