Allegiant and AirTran increasing capacity; Ryanair full year outlook improves

US airline stocks were boosted yesterday after Continental Airlines reported strong traffic growth for January, driven by international demand, and improving (though still falling) yields.

Allegiant continues on growth path

Allegiant’s shares were also boosted by its Jan-2010 traffic results, which revealed a 15.4% increase in total system passengers (to 413,320), with a 0.4 ppt load factor improvement to 86.2%. Capacity (ASKs) was boosted by 20.6% in the month.

Allegiant has remained robust throughout the global economic slowdown, with the carrier’s  expansionist strategy seeing the carrier increase scheduled service capacity by over 27% in FY2009. Looking forward, the LCC is expecting total system capacity growth of approximately 15% in 1QFY2010.

Record traffic again for AirTran in Jan-2010

While Allegiant remains the notable standout in terms of its growth profile, AirTran has signaled its intention to return to growth in 2010.

AirTran reported that traffic (RPMs), capacity (ASMs) and enplaned passengers all represented new monthly records for the month of Jan-2010, with the carrier handling 1.7 million passengers in the month (+2.6%), on a 8.6% capacity increase. Traffic was up 6.8% in the period, resulting in a 1.2 ppt load factor reduction of 72.0%.

Looking forward, AirTran expected to increase capacity by 3-4% in 2010 and 2-3% in 2011.         

Analysts expect Ryanair full year results to exceed new guidance

Across the Atlantic, Citigroup stated it expects Ryanair (shares down 1.1% yesterday) to exceed its guidance for the 12 months to Mar-2010. The broker has maintained its one-month medium risk ‘buy’ rating and 12-month target price of EUR4.60 in anticipation that the carrier will "shake off its recent share price lethargy and move back into outperformance mode".

Citgroup commented, “its share price has risen by only 6% over the last year, compared with +21% for easyJet and +48% sector average”. 

Royal Bank of Scotland (RBS), in contrast, rates the shares as no more than a ‘hold, and recommends taking profits on any sign of share price strength. RBS has valued the carrier shares at EUR3.50 and with an underlying net earnings estimate for FY2010 of EUR328 million, also above the company’s guidance. Deutsche Bank also has a ‘hold’ recommendation on the shares, with a price target of EUR3.40.

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Selected LCCs daily share price movements (% change): 02-Feb-2010