06-Oct-2009 4:10 PM

WestJet unit revenue down by double digits, GOL’s yield suffers in Sep-2009

Analysis

WestJet's shares slipped 1.5%, as the carrier stated it anticipates revenue per available seat mile (RASM) to decline by 15-17% year-on-year in 3Q2009, slightly better than the carrier's original expectation.

The carrier also reported an improvement in Sep-2009 load factor, up 2.2 ppts to 77.7%. The Canadian LCC stated, "while the demand environment remained a challenge, our strategic capacity management, strengthening sales channels and strong brand helped us end the quarter on a positive note."

GOL's yield suffers in Sep-2009, due to "highly competitive price scenario" in the domestic market

In Brazil, GOL's shares gained 2.2% after the Rio 2016 Olympics bid win. GOL also released its Sep-2009 traffic yesterday, stating that due to the "highly competitive price scenario in the domestic market, at unsustainable levels", average net yield in Sep-2009 was around BRL 17.00 cents (USD 9.66 cents), taking the quarterly yield to slightly to approximately BRL 19.00 cents (USD 10.80 cents).

Also in the period, GOL reported an 8.7% capacity (ASKs) increase, which was exceeded by a 26.6% traffic (RPKs) increase, resulting in a 9.4 ppt load factor improvement to 66.4%.

Southwest downgraded by Raymond James

Southwest Airlines' shares slipped 1.3%, after the LCC was downgraded from "outperform" to "perform" by Raymond James, due to its "premium valuation" and stronger cash positions among some of its weaker rivals, due to recent cash boosting activity by US airlines.

According to Raymond James, "investors may be overestimating LUV's margin expansion potential in a recovery given comparisons to prior periods where Southwest benefited substantially from below market fuel prices". The company added that Southwest "will not benefit in the near-term from the restructuring of weaker players."

Allegiant load factor slips, but remains above 89%

Also in the US, Allegiant's shares were up 0.5%, as the carrier reported a massive 53% jump in scheduled passenger numbers in Sep-2009. Load factors, however, slipped 2.0 ppts, to a still high 89.8%.

AirTran reports record load factor, pax levels and traffic for September

AirTran's shares also gained 0.2% yesterday, as the carrier reported that traffic (RPMs), load factors and enplaned passengers represented a new all-time record for the LCC for the month of September.

The carrier reported a 7% increase in passenger levels in the month, to 1.8 million, with load factor also on the improve, up 2.6 ppts to 77%.

Ryanair continues to grow, with 17% jump in pax levels

In European LCC traffic news, Ryanair's shares gained 1.0% yesterday (05-Oct-2009), on the same day Europe's largest LCC reported a 17% jump in passenger numbers to 6.1 million in Sep-2009. Load factors were up, by 1 ppts, to 85%.

British Airways/Iberia merger could force bid for Vueling

Also in Europe, Vueling's shares jumped 6.5%, after initially falling 3.9%, on news that the planned merger between British Airways and Iberia could force the combined entity to bid for the LCC. Alternatively, the combined carrier could also be forced to reduce its holding in Vueling.

Selected LCCs daily share price movements (% change): 05-Oct-09