Japan Airlines (JAL) reportedly plans to defer talks with Delta Air Lines and American Airlines over possible equity investments, to focus on developing a restructuring plan with a government-backed task force (Kyodo, 05-Oct-2009). Meanwhile, JAL plans to reduce fiscal 2010 flight attendant hiring plans by two-thirds (Reuters, 05-Oct-2009).
Japan Airlines to shelve talks with Delta, American
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US airlines cut capacity to trigger PRASM momentum from rising fuel prices
Delta Air Lines and jetBlue Airways are the latest US airlines to trim their capacity forecasts, after the US major global network airlines American and United made adjustments to their projections in early 2016. The latest cuts initiated by US airlines appear to be driven by a continuing depressed pricing environment and rising fuel prices, as oil touches USD50pb again.
By reducing capacity airlines hope to restore a supply-demand balance that allows for fare increases to shore up passenger unit revenues, which have been on the decline for more than a year. Overall airline valuations show that investors remain anxious over negative PRASM, and are essentially ignoring the record profits and margins recorded by US airlines.
Delta has previously missed two separate time periods in which it aimed to return to a flat PRASM performance and has pledged to reach that goal by YE2016. As targets have slipped, most US airline executive management teams continue to stress the importance of positive PRASM and the weight it carries with investors.
Spirit Airlines makes some progress in operations, but still lags its peers in key metrics
Operational improvement is a top priority for Spirit Airlines' new CEO, who has held the position for just six months. Data from the US government show that Spirit is making progress in some areas of operations, but still lags behind other US airlines. As the busy summer season kicks into full force, Spirit’s commitment to improving operations could be put to the test.
As Spirit’s rivals hone their product segmentation strategies to match Spirit’s low fares, operational improvement takes on a whole new level of importance for the ultra-low cost airline and its particular business model. Spirit’s ULCC rival Frontier is outperforming Spirit in some operational metrics.
Spirit is in undergoing other changes, including a change in its fleet mix to smaller-gauge Airbus narrowbodies. The company has intimated that it would examine smaller markets in the future to decrease competition with larger airlines. Many of the new routes that Spirit has introduced in 2016 feature Southwest and Delta as competitors and it appears that Spirit now has the largest network overlap with Southwest, rather than with American Airlines.