26-Nov-2009 3:35 PM

ATA airlines report improved load factors; US Airways and GOL up

The majority of North and South American carriers’ stocks rebounded on Wednesday (25-Nov-2009), ahead of the Thanksgiving Day holiday, typically one of the busiest periods of the year for US carriers. The AMEX Airline Index was up 1.6%, while the Dow rose 0.3%. Oil prices also made gains, ending the day up 2.3%, to USD77.80.

US Airways still benefiting from liquidity plans

CreditSights stated US Airways (+7.0%) plans to improve near and future liquidity keeps the carrier “in the game and remain on its quest to merger”, citing United Airlines (+3.5%) as a “logical partner” for such a tie up. However the analysts stated United Airlines would have more leverage in such a merger.

Legacy carriers witnessed the largest improvements during trading on Wednesday, with US Airways (+7.0%), American Airlines (+4.3%), United Airlines (+3.5%), Delta Air Lines (+3.0%) and Continental Airlines (+1.5%) all up at the end of trading.

GOL edges up slightly

GOL stocks meanwhile edged up slightly, following news Fitch Ratings made the following ratings for the LCC during trading:

Foreign and Local Currency long-term Issuer Default Ratings (IDRs) at 'B+';
Long-term National Rating at 'BBB(bra)'.

ATA reports improved load factors, as traffic continues to improve

Air Transport Association of America (ATA) reported a greater reduction in capacity than demand among member carriers in Oct-2009, resulting in improved load factors for the month, with traffic (RPMs) continuing to improve.

RPM growth on the improve

Traffic (RPMs) fell 2.1% year-on-year for the month, compared to only 0.6% in Sep-2009. However, this is still an improvement compared to earlier months, particularly 1Q2009, in which the association reported double digit declines. International traffic fell 2.8% year-on-year, with Latin RPM growth showing the greatest improvement, up 3.6%. Domestic RPMs meanwhile fell 2.1%

ATA Airlines RPM growth by region: Jul-2006 to Oct-2009

Capacity cuts continue, particularly in the Atlantic

Capacity meanwhile fell 6.0% for the period, outweighing traffic declines. The greatest capacity cuts by carriers were made in services to the Atlantic region, down 11.6%, as passenger demand continues to suffer amid the global financial downturn. International ASMs were down 7.5% overall, while domestic ASMs were down 5.3%.

ATA Airlines ASM growth by region: Jan-2008 to Oct-2009

As a result, load factors rose 3.2 ppts for Oct-2009, to 82.8%, the fifth consecutive monthly improvement. International loads were up 4.0%, while domestic loads were up 2.8%. Each region saw improved load factors. However, Pacific loads appear to be struggling, up only 0.3%, compared to 0.6% in Sep-2009 and 1.1% in Aug-2009.

Passenger numbers remain soft

Overall, passenger numbers fell 3.9% for the month, led by a 4.2% drop in domestic passengers. International passenger numbers meanwhile fell 2.0%, with Latin passenger traffic seeing the greatest growth, up 2.6%. Other regions witnessed negative growth.

ATA meanwhile expects a 4% decrease in the number of passengers traveling on US airlines during the 2009 Thanksgiving holiday season, despite deep discounting over the past several months.

The association also reported earlier this week that passenger revenue, based on a sample group of carriers, fell 15% for Oct-2009. This marks the 12th consecutive month in which passenger revenue has declined from the prior year, fuelled primarily by the 11th consecutive month of ticket price declines.

Despite the improvements, domestic US airline yields continued to contract at double-digits levels, slumping 12.5%, the eighth consecutive month of decline, while international yields showed signs of bottoming over the Northern Summer.

ATA Airlines passenger number growth by region: Jun-2007 to Oct-2009

North & South America selected airlines daily share price movements (% change): 25-Nov-09