- Global: +2.9% capacity, +1.9% scheduled services year-on-year;
Global seat capacity up 2.9% in Jan-2012: OAG
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American Airlines projects USD5 billion fuel cost savings in 2015, but flight crew costs to blow out
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
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.