Air Canada reports improved net income; Republic expects Midwest and Frontier 2010 to be profitable


The AMEX Airline Index (+4.4%) soared on Friday, as a number of North and South American carriers saw improved stock prices, as a result of oil prices (-2.8%) dropping over USD2.00, to USD77.43. Stocks were also assisted by a slight rise in the Dow (+0.2%), despite another rise in the US unemployment rate, which rose above 10% for the first time in 26 years in Oct-2009.

Air Canada reports net income of USD259 million for 3Q2009, based on forex

Air Canada (+1.8%) saw improved earnings in 3Q2009, reporting a net income of CAD277 million (USD259 million) for the quarter, including gains on foreign exchange of CAD295 million (USD275.8 million), compared to a net loss of CAD132 million (USD123.4 million) in 3Q2008. Adjusting according to the foreign exchange gains, the carrier reported a loss of CAD0.19 (USD0.18) a share.

The carrier reported a 13% year-on-year decrease in passenger revenue, due to an 11.2% decline in yield and a 2.1% drop in traffic. RASM decreased 10.2%, due to the decline in yield, as passenger load factor improved by 1.0 ppt. Unit cost (excluding fuel expense) meanwhile increased 4.5%, largely due to timing of aircraft maintenance and related expenses.

CEO, Calin Rovinescu stated “the worst of the worst seems to be behind us…We're seeing sprouts of green coming up from the earth” and now plans to focus on regaining Business demand, which the carrier believes will “come back slowly”. Revenue from Premium passengers decreased 16% year-on-year in 3Q2009, compared to a 30% decrease in 2Q2009. Air Canada partly attributed the improvement to the introduction of its lower-priced Executive Class earlier in the year. Mr Rovinescu that although Premium demand does appear to be on the mend, a full recovery in the market may not occur until mid-2011.

Mr Rovinescu added it could be 12 to 18 months until fares return to pre-global financial downturn levels, especially in business class as both Air Canada and WestJet continue to see improved traffic with their lower fares.

AirTran sees further opportunities to increase ancillary revenues

AirTran (11.8%) stated on Friday that it expects to make USD340 million in 2009 in ancillary revenue and sees more opportunities to expand its ancillary offerings.

GOL reports 15.1ppts improvement in load factor

GOL (+3.5%) reported during trading a 15.1 ppts improvement in load factor, to 71.9%, on the back of a 38.9% increase in traffic (RPKs) and 9.6% increase in capacity (ASKs). [please link to LCC share wrap]

Republic expects Frontier and Midwest to be profitable in 2010

Meanwhile, Expressjet (-4.9%) and Republic Airways (-2.5%) were the only two carriers seeing a drop in stock prices for the day. Republic’s stocks fell despite stating the day prior that it expects both its newly acquired carriers, Frontier Airlines and Midwest Airlines to be profitable in 2010.

North & South America selected airlines daily share price movements (% change): 06-Nov-09

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