A seven-year low in US stocks led to another day of declines for North and South American carriers on Monday (07-Jun-2010), despite IATA releasing an improved forecast of their performance for 2010. The Dow (-1.2%) fell on continued concerns that Europe’s debt issues could derail economic recovery.
The AMEX Airline Index (-1.9%) declined as a result, despite a minimal fall in oil prices (-0.1%), to USD71.44.
ExpressJet announces details of 'Operation: Green Light'
ExpressJet (-4.4%) was down the most on Monday. The carrier announced details of the first step of its multi-phase "Operation: Green Light". The key elements of the plan's initial phase, expected to provide up to USD40 million in run-rate cost savings, include:
- Reducing corporate overhead, including implementation of a hiring freeze for all current management openings;
- Increasing the company's focus on "safety at work" to reduce worker's compensation claims and lower restricted cash requirements;
- Collecting revenue-related amounts owed under third-party contracts;
- Improving crew planning procedures to increase productivity and lower related travel expenses;
- Increasing maintenance productivity while lowering vendor costs.
The plan was developed in coordination with ExpressJet's advisers, including Goldman Sachs & Co and Seabury Securities LLC, with the carrier commencing implementation of the plan during 2Q2010. As ExpressJet completes the implementation of the plan's initial step, it will begin detailing the next phase of cost savings opportunities, which will include a competitive review of all salaries and benefits. The next phase of the plan will be designed to provide ExpressJet with a competitive cost structure and a stronger balance sheet to support growth and new, profitable opportunities.
See related CAPA Profile: American Aviation
United estimates 25.5%-26.5% improvement in PRASM
United Airlines (-3.7%) was also down. During trading, the carrier reported a 3.3 ppt year-on-year improvement in load factor for May-2010, to 83.3%. The improvement was the result of a 7.5% rise in traffic (RPMs) on a 3.3% increase in capacity for the month. Passenger numbers were also up, gaining 3.3%, to 7.1 million.
United also estimated a 25.5%-26.5% year-on-year rise in passenger revenue per ASM for May-2010 and is estimated to have risen 3.2-4.2% compared to May-2008, 2.2 ppts of which were due to growth in ancillary revenues.
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IATA forecasts improved profits in North and Latin America
North American carriers are expected to return a profit of USD1.9 billion for 2010. This is a major reversal from the previously forecast USD1.8 billion loss, and the USD2.7 billion that the region’s carriers lost in 2009. The US economy is growing with a 3.3% GDP expansion. Carriers are improving efficiencies as a result of demand growth, capacity cuts and domestic mergers.
Traffic (TKPs) is now expected to grow 8.2% year-on-year for 2010, compared with the 6.2% rise forecast in Mar-2010. IATA estimates traffic fell 7.3% for 2009. Capacity (ATKs) is expected to increase 4% for the year, compared with a previously estimated 3.3% increase. Capacity is estimated to have declined 6.5% in 2009.
In Latin America, IATA forecast carriers will show a profit of USD900 million for the year, up slightly from the USD800 million previously forecast. Having posted a USD500 million profit in 2009, Latin America will be the only region to post two consecutive years of profit. The region’s commodities are closely linked with Asian growth and supported by a 3.9% GDP expansion this year.
Traffic is expected to rise 13.9% for 2010, compared with a previously estimated 12.2%. IATA estimates traffic was flat in 2009. Capacity is forecast to increase by 9.6% for the year, compared to the 8.1% previously forecast. Capacity is estimated to have risen 1.3% in 2009.
North & South America selected airlines daily share price movements (% change): 07-Jun-2010