23-Mar-2011 3:30 PM
US carriers talk of 2011 plans, mergers and impact of Japan on operations
Analysis
Shares in US carriers closed lower on Tuesday, with sharp falls seen in American Airlines, US Airways and Allegiant Airlines shares. Executives from US airlines are attending the JP Morgan Aviation, Transportation and Defence Conference and have provided updates on their plans for 2011 and the outlook for the rest of the year.
Summary
- US airline shares experience sharp falls, particularly American Airlines, US Airways, and Allegiant Airlines.
- Delta Air Lines reduces capacity to Japan by 15-20% due to the suspension of Tokyo service, projecting a revenue impact of USD250-400 million.
- Rising fuel prices expected to increase Delta Air Lines' fuel expenses by USD3 billion, or 35% over 2010.
- JetBlue aims to increase revenue by 60% from corporate contracts and reports strong growth in its Caribbean and Latin America unit.
- American Airlines plans to reduce consolidated capacity by 1% and refurbish its existing 737-800s to accommodate more seats.
- Southwest Airlines successfully raises fares to offset higher fuel prices and expects to close its acquisition of AirTran in 2Q2011.
- Plans to reduce capacity to Japan by15-20% through May-2011, including the suspension of Tokyo service. Reductions expected to have a net effect of USD250-400 million on revenue. Last week, Delta stated it would postpone new services from Los Angeles and Detroit to Japan, but plans to restore service as demand picks up again. Besides Tokyo, Delta also operates to Nagoya and Osaka;
- Rising fuel prices projected to increase the fuel expenses by USD3 billion, or 35% over 2010;
- Plans to reduce 2H2011 capacity, retiring 120 of its least efficient fleet over the next 18 months including DC9, Saab turboprops and 60 50-seat regional jets;
- Plans to reshape its hedge portfolio and lock-in hedge gains;
- Cut Memphis departures by 25% and reduce capacity in under-performing trans-Atlantic markets.
- Aims to announced plans to increase revenue by 60% from corporate contracts;
- Reported that its Caribbean and Latin America unit revenue growth has outpaced the system average;
- Plans to expand its partnership footprint in 2011 with approximately five possible new partnerships in the works.
- Planning for consolidated capacity to be 1% lower than the previously forecast 2011 levels. Capacity change driven by B737-800s replacing smaller MD80s, and increases in stage length due to more international services;
- Plans to refurbish its existing 737-800s to take 160 seats instead of 148;
- 60 cost reduction initiatives under 2011 plans;
- Continue focus on major US markets such as New York, Dallas Fort Worth, LAX and Miami.
- President Scott Kirby stated the outlook for a merger remains, but with a five to seven year timeframe. Considering possibilities with American Airlines, Delta or United. Membership in Star Alliance means easier consolidation with United.
- May consider A320neo for narrowbody fleet replacement
- United Airlines plans to reduce 4Q2011 domestic capacity by 5% year-over-year, putting a higher focus on international services.
- Reported "delightful success" raising fares to offset higher fuel prices, with six fare increases so far this year. Traffic holding up "very well"
- Announced it could add new types to its fleet and could handle "two or three" fleet types. Carrier is open to discussion regarding two-aisle narrowbody aircraft.
- Expects to close its acquisition of AirTran in 2Q2011, with integration to occur between 2011 and 2013. AirTran shareholders will meet on 23-Mar-2011 to vote on the Southwest Airlines takeover.
- Expects to grow is fleet "very modestly" in 2011, and is contemplating "a lot of retirements". Plans to increase capacity by 5-6% in 2011.
Selected AAD daily share price movements (% change): 22-Mar-2011
