US carrier stocks were dragged down by Latin American carriers on 11-May-2011 after Gol Intelligent Airlines lowered its operating profit margin because of higher fuel costs (Market Pulse, 11-May-2011). Shares of United Continental decline 1%, Delta Air Lines fell 1.5% and JetBlue fell 1%.
US carrier stocks dragged down by Latin American carriers
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Southwest Airlines:domestic changes, continued international expansion, as overall 2017 growth slows
Southwest Airlines plans lower system capacity growth in 2017. The company joins other US airlines working feverishly to return to positive unit revenue as oil prices and labour costs are forecast to rise for most of the country’s airlines.
Even as Southwest’s capacity increases are projected to fall year-on-year in 2017 the airline is broadening its international reach with the debut of new flights from Fort Lauderdale, and is making moves in its domestic network.
This includes its decision to launch service from Cincinnati, a market that has attracted significant low cost service during the past two to three years as its hub status for Delta has diminished. Southwest’s service entry at Cincinnati comes at the cost of flights from Akron and Dayton, which is not surprising, given Cincinnati’s potential to garner higher revenue.
Although Southwest cited some positive trends at the end of 2016, it struck a cautious tone about the operating environment in the US, noting that while yields were improving, the revenue environment remains challenging. US airlines, including Southwest, are being closely watched after declaring they will return to positive unit revenue in 1H2017.
Airline JVs under scrutiny in Qantas-American; Delta-Aeromexico; Alaska-Virgin America merger
Concerns over the US Department of Justice obstructing the merger between Alaska Air Group and Virgin America were laid to rest in Dec-2016: the agency cleared the tie-up through a fairly benign requirement that Alaska and American must relinquish some codesharing routes. The result is that Alaska and Virgin America will bolster their combined positions at key US markets in order to compete more effectively with larger US network airlines.
DoJ’s blessing is a major milestone for Alaska. Since the company announced its plans to acquire Virgin America in Apr-2016, it has continually stated that it expected to close the deal by YE2016, after gaining DoJ’s approval. But the initial closing date was pushed back in order for DoJ to gain more time to review the transaction. The extended review caused jitters among Alaska’s investors about potentially onerous conditions to be imposed by DoJ, but ultimately the agency’s requests were rational.
In the last weeks of 2016 US regulators have pointed a new direction for joint venture, but the message is not entirely clear. Adopting a reasoned approach to the Alaska-Virgin America tie-up while rejecting a proposed joint venture between Qantas and American, and driving Aeromexico and Delta to reconsider their JV after imposing conditions the airlines deemed to be unworkable. In part, those decisions reflect the influence smaller airlines have exerted on the current US Presidential administration.