Rising consumer sentiment has fueled the airline industry by strengthening passenger traffic for most airlines. Delta Air Lines, Inc. (NYSE:DAL) and US Airways Group Inc (NYSE:LCC) offer an attractive investment prospectus and they are suited for growth-oriented portfolios. On the other hand, United Continental Holdings Inc (NYSE:UAL) may not be a good investment at the moment for the reasons outlined below.
Here come the numbers! They are important!
Every month, airline carriers release a monthly traffic report. By delving through these statements, we may have a general idea about company performance. Also, the data will be reflected in second-quarter 2013 earnings statements.
Delta Air Lines, Inc. (NYSE:DAL) saw its domestic revenue passenger miles (RPM) decline by 0.8% to 10.5 billion for the month of June on a year-over-year basis. However, RPMs for the international section increased by 2.8%, fueled by a 6% jump in Latin American flights. The international section is important because the flights offer the highest operational margins due to the implementation of newer and more fuel-efficient aircraft. Its overall RPMs increased by 0.7% to 18.3 billion.
The company has expanded its available seat miles (ASM) to capture as many passengers as possible. Its domestic ASM increased by 0.7% to 12 billion. Further, its international ASM increased by 2.2% to 8.9 billion. Its load factor resulted in a decline of 0.6% to 87.5%.
In brief, the company had steady passenger traffic, and it is meeting the demand by adding seats available for purchase.
US Airways Group Inc (NYSE:LCC) had blowout performance in June. Its domestic RPM increased by 7.4% to 4.4 billion. What’s more is that its Latin American RPM increased by 12% to 0.5 million. The total mainline RPM increased by 7.3% to 5.8 billion.
To meet the strong passenger traffic, the company is adding more seats available for purchase in the form of available seat miles (ASM). Its ASM for the domestic section increased by 4.9% to 4.9 billion. Its Latin American ASM increased by 13.4%. The robust passenger traffic increased the load factor by 1.7% to 88.2%.
United Continental Holdings Inc (NYSE:UAL) is struggling to capture the passenger traffic other carriers are enjoying. Its RPM in the domestic division declined 2.4% to 8.5 billion. On the other hand, the international RPM increased by 1.5% to 8.2 billion fueled by a 3.4% increase in its Latin American RPM. Overall, its consolidated RPM declined by 0.6% to 19.1 billion.
To keep its operational margins steady, the company has removed 2.0% of the available seat miles to end up at 21.7 billion. Its domestic ASM decreased by 4.1% to 9.5% and its international ASM remained unchanged at 9.3 billion.
As a result of lower ASM, its load factor increased 1.7% to 87.7%.
Enough of numbers!
Ok, ok. In brief, US Airways Group Inc (NYSE:LCC) had outstanding passenger traffic in June. Delta Air Lines, Inc. (NYSE:DAL) had a good month, and United Continental Holdings Inc (NYSE:UAL) had poor performance. What worries me is that United Continental has been trending down.
What are the tailwinds for these carriers?
The airlines are trying to increase their presence in international markets. Overall, their Latin American flights have been more profitable due to higher loading factors.
Delta Air Lines, Inc. (NYSE:DAL) has inaugurated a $1.4 billion Terminal 4 in the JFK International Airport in New York. This strategy will increase its presence internationally. Further, the company is renovating the Terminal 3 in the same airport. Its passenger traffic from JFK International Airport may increase considerably in the coming quarters.
Further, the company has formed a partnership with Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) to increase passenger traffic between the U.S. and Brazil. In addition, it is waiting for final approval from the U.S. Department of Transportation to inaugurate the route from Atlanta to Sao Paulo. This should be important since Sao Paulo, Brazil is economically the most important city in South America.