AirTran TRASM to grow 13-14% in 2010 on rapid yield improvement: Peanuts Share Wrap

AirTran plans to maintain a fleet size of 138 aircraft in 2010, with capacity (ASMs) growth of 3%-4%, while fleet size will increase to 145 aircraft in 2011 (+3-4% ASMs) and 153 aircraft in 2012 (+5-7%). US LCCs are estimated to provide 29% of domestic capacity (ASMs) in 2010, against 55% by full service carriers and 16% by regional carriers.

AirTran released the following highlights in its investor update on 13-May-2010:

  • Estimated total unit revenue (TRASM) to be up 13% to 14%;
    • Revenue trends to continue to accelerate in 2Q2010;
  • Average economic cost per gallon of fuel all-in is USD2.37 to USD2.42;
    • Approximately 60% hedged for 2H2010;
    • Hedged 56% of fuel requirements for 2010 and 29% of fuel requirements for 2011;
  • Net fuel unit cost up 4.0% to 4.5%;
    • Non-fuel unit cost for full year 2010 up 4.0% to 5.0%;
  • Plan to pay USD96 million of convertible debt with cash in Jul-2010;
    • Will likely result in reduced short interest;
  • Robust recovery in yields;
    • Rapid year-to-date improvement into 2Q2010;
    • Expect double-digit increase in 2Q2010 TRASM, compared with the previous corresponding period.

AirTran stated its network is better diversified network with more than 713 daily departures to more than 70 destinations. 47% of departures will be from the Atlanta base, while 41% is from its Florida base, 13% from Baltimore base, 13% from Milwaukee base and 6% from Caribbean base.

North and South American LCC stocks retreat

North and South American low cost carrier stocks retreated yesterday, following positive performance in recent days. The Dow (-1.05%) dipped, with the AMEX Airline Index ended trading down 1.06%.

WestJet dipped (-0.2%), JetBlue, Allegiant and Southwest lost more than 1.0% (-1.4%, -1.7%, -1.9%, respectively), AirTran closed 2.0% lower and Vueling led the way down (-4.2).

Elsewhere in the Asia Pacific, Virgin Blue surged 7.7%

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Selected LCCs daily share price movements (% change): 13-May-2010