22-Sep-2009 3:55 PM

AMEX Airline Index gains, Hawaiian Airlines up despite expected fall in PRASM

The AMEX Airline Index (+4.4%) resumed its rise on Monday (21-Sep-09), following a sharp fall in oil prices (-2.9%), to USD69.93. The broader market meanwhile dropped, with the Dow (-0.4%) down at the end of trading.

Investors instead focused on the success airlines are having in raising yet more funds to help finance their losses. Analysts at Barclays Capital stated that US carriers have indicated revenue is “improving significantly” in 3Q2009, with sales still having room to grow. Credit markets are also becoming more open to airlines, which the analysts stated has provided “much needed cushioning”.

Yesterday's share price gains came despite two sets of data showing network airlines continue to struggle.

BTS reports improved operating margins for 2Q2009

The US Bureau of Transportation Statistics (BTS) stating all US carriers reported improved operating margins in 2Q2009. Full service carriers as a group posted their smallest operating margin loss for any quarter since Sep-2007 (-0.5%), while LCCs and regional carriers reported profit margins. The LCC profit margin of 7.0% was the largest since 2Q2007, while the regional carrier margin of 7.2% was the largest since 4Q2006.

ATA announces 21% drop in passenger revenue in Aug-2009

Meanwhile, the Air Transport Association of America (ATA) announced passenger revenue for selected airlines fell 21% year-on-year in Aug-2009, the tenth consecutive monthly decline. According to ATA, passenger numbers on US airlines fell 6% in Aug-2009 while the average cost per ASM fell 17%. ATA also reported a 13% decline in cargo traffic (FTKs), the 12th consecutive month of declines.

ATA President and CEO, James May stated, “the industry continues to see a reduction in the number of air travellers, despite double-digit declines in fares. While there are signs that improvement may be on the horizon, regrettably the demand for air travel remains weak.”

AMR announces public offerings of common stock and convertible senior notes

American Airlines (+4.4%) announced during trading that it intends to make concurrent offerings, subject to market and other conditions, of 30 million shares of its common stock and USD250 million principal amount of its convertible senior notes due 2014. AMR intends to use the net proceeds from the offerings for general corporate purposes.

Hawaiian forecasts fall PRASM for 3Q2009

Hawaiian Airlines (+3.7%) stated it expects PRASM to drop 15.8% to 18% year-on-year in 3Q2009. Capacity is meanwhile expected to increase 2.5% to 3% year-on-year.

In terms of operating expenses, Hawaiian anticipates CASM, excluding fuel, to increase by approximately 0.5% to 3.0% compared to 2Q2009, and to increase 14.5% to 17.0% year-on-year. The carrier stated it has revised its previous expense forecast made in 2Q2009, to reflect a greater than previously anticipated increase in maintenance expenses. According to Hawaiian, these forecasts are in line with its previous forecasts made in its 2Q2009 earnings call on 27-Jul-09.

North & South America selected airlines daily share price movements (% change): 21-Sep-09