Airline industry overview
The US airline industry posted one of the strongest profitability reports in the first quarter of 2015, a quarter that has been traditionally weak. Net income for 1Q15 grew by ~371%, compared with 1Q14.
In this series, we will analyze the performance of six major airlines:
- Alaska Air Group (ALK)
- Delta Air Lines (DAL)
- JetBlue Airways (JBLU)
- Southwest Airlines (LUV)
- United Continental (UAL)
- American Airlines (AAL)
These airlines constitute a majority of the market share (~78% by revenue passenger miles). Most of these airlines are a part of the iShares Transportation Average ETF (IYT), which holds ~38% in airline stocks.
This overview includes a discussion of the growth trends of key indicators like traffic, passenger revenue per available seat mile, capacity, and capacity utilization for each of the six major airlines mentioned above.
The six major airlines continued to show strong growth in both traffic and capacity in May 2015. Traffic for these airlines grew by an average of 5.20% in May, while capacity grew by 5.93% on average during the month. The key performance highlights are:
- Traffic as measured by revenue passenger miles saw growth across all the major air carriers.
- All six major airlines increased capacity in excess of May’s demand.
- Load factor, or capacity utilization, fell for all airlines except Southwest Airlines (LUV) and JetBlue Airways (JBLU).
- Most of the carriers saw a fall in passenger revenue per available seat mile (or PRASM) due to pricing issues and a fall in oil prices. This is expected to continue in the near future, hampering the growth plans of some airlines.
We will discuss the detailed operational performance of individual airlines throughout this series.