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Analysis for Global

Alaska posts strong CY2014 results, prepares for softer revenues in 1Q2015, but outlook strong

28-Jan-2015 9:24 PM

Alaska Air Group benefitted from a strong domestic environment in 2014 that helped the airline continue execute a solid financial performance and deliver an impressive 18.6% return on invested capital for 2014.

Even as Alaska believes the US economy remains strong, like to the country’s other airlines, it appears to be bracing for some revenue headwinds in 1Q2015 driven by what seems to be unique factors that should not linger throughout the year.

Alaska is also forecasting flat unit cost growth year-on-year in 2015, which is somewhat better than other large US airlines, but not as strong a performance as Alaska has delivered in the past.

Air China and United Airlines vie for title of largest carrier between China and the United States

28-Jan-2015 5:00 PM

China's regulator the CAAC decreed that Air China is the largest carrier in the China-US market, ending the "domination" of US carriers. However this was based on Air China operating to six US cities while the largest US carrier, United, links China with only five US cities.

On almost every other metric – seats, frequency, city pairs – United (Air China's Star Alliance partner) is far larger and will grow in 2015 as it expands its Chengdu service and adds a second daily flight from San Francisco to Shanghai, the first example of a US carrier having more than a daily flight on a Chinese routing.

Perhaps more important though is the fact that the CAAC saw fit to announce the comparison, a clear statement that China's international airlines are on the march, particularly in one of their most important strategic markets.

American Airlines projects USD5 billion fuel cost savings in 2015, but flight crew costs to blow out

28-Jan-2015 4:23 PM

Despite heightened low cost competition in numerous markets that began in 4Q2014, American Airline recorded strong financial results and has opted to initiate a USD2 billion share repurchase set for completion in 2016, after finishing an initial USD1 billion buyback a year early.

Like its US airline rivals, American is projecting a soft unit revenue performance in 1Q2015 driven by the growing pressure from low cost airlines, higher aircraft density and some currency headwinds from the strengthening USD.

American’s projected decline is somewhat steeper than its rivals, but some of the pressure it experienced in certain geographies in 2014 should ease in 2H2015. At the same time the airline is projected to save a whopping USD5 billion in fuel expense during 2015, a benefit of its decision not to adopt a fuel hedging strategy.

Southwest Airlines finally exceeds return goals with fuel windfall; but others want to share in it

26-Jan-2015 6:58 PM

Southwest Airlines capped a strong 2014 by posting a 21% return on invested capital (ROIC) – it best performance in that metric since 1981. It is a welcome performance for Southwest after the company missed its return goals for the previous two years.

The airline also continues to see solid demand, but like United, is monitoring corporate travel trends in the energy sector as a result of rapidly falling fuel prices. Southwest is also predicting flat passenger unit revenue growth for 1Q2015, which is in line with the estimates of its rivals United and Delta.

A sharp decline in oil prices has resulted in Southwest projecting roughly USD1.7 billion in fuel expense savings in 2015. But unlike some of its competitors, the airline is not rushing to define how it intends to apply the savings. As the rising chorus of "me too" gathers volume, Southwest looks likely to be confronting the same issues that its major peer airlines are beginning to.

Commercial Aircraft Values: CAPA's partner Oriel looks at the prospects for 2015

23-Jan-2015 3:29 PM

January, as befitting the two headed Roman God who gives his name to the month, is a time for reflection and expectation.

So Oriel, CAPA's partner in leading fleet data, has put commercial aircraft values under the spotlight. With the usual turbulence in the industry compounded by the multiple flow on effects of the oil price slump, 2015 looks likely to be another year where staying agile - and knowledgeable - will be essential.

This report covers the outlook for each of the main categories of aircraft: in-production narrowbodies; out-of-production narrowbodies; in-production widebodies; out-of-production widebodies; widebody freighters; regional jets; and turboprops - along with a global overview.

Delta Air Lines finishes a solid 2014 ready to face currency headwinds and macro pricing pressure

21-Jan-2015 10:30 PM

Delta Air Lines recorded a strong financial performance for 4Q2014 and YE2014 – excluding special items – driven by continued strength in its domestic entity and a solid cost performance as non-fuel unit costs remained essentially flat throughout 2014.

Delta is starting 2015 with headwinds due to the appreciation of the USD against some weaker currencies, but remains confident of meeting its stated financial targets that include ROIC of more than 18% and operating margins of 11% to 14%.

An anticipated significant USD2 billion in fuel savings during 2015 will also help blunt some of the effects from currency weakness; but Delta is stressing that it will use the savings to slash debt, and pending board approval, possibly increase shareholder rewards.

India's airlines could save USD400 million this year on lower fuel prices: CAPA India Summit 3/4-Feb

21-Jan-2015 6:27 PM

India’s beleaguered aviation industry is starting to see signs that could possibly mark the beginning of a structural turnaround in its fortunes.

The sharp decline in fuel prices is a major source of relief in a market where aviation turbine fuel is subject to some of the highest taxes in the world.

But other key contributors to the more positive outlook include an improving economic environment, and recent actions by the Ministry of Civil Aviation which suggest that it is seeking to play a more enabling role. India's aviation system may at last be coming of age.

CAPA will convene an India Aviation Summit in Mumbai on 3/4-Feb-2015.

Delta Air Lines and Virgin Australia seek re-authorisation for US-Australia JV despite low growth

21-Jan-2015 10:31 AM

Delta Air Lines and Virgin Australia are seeking re-authorisation for 10 years from Australian regulators for their joint venture. The US DoT initially took longer to approve the alliance but gave indefinite approval. Virgin continues to need Delta as a partner more than Delta needs Virgin, owing to the numerous connections from US gateways Virgin needs access to. The two will account for 25% of 2015's seat capacity compared to a much larger 56% for Qantas, with the remaining 19% held by United.

There have been limited developments from the smaller carriers, and Delta and Virgin have offered little growth. Nor in their application do they suggest further growth is on the horizon. Virgin Australia is short on long-haul aircraft and anyway is focused on its core domestic market. Delta has a much larger globe to tend to. United has made incremental changes while Qantas has grown the most. Given market dynamics, there is little prospect for a new entrant.


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