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Which of the US Airlines Is Growing the Fastest?

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4Q15 revenue growth

For 4Q15, JetBlue Airways (JBLU) and Spirit Airlines (SAVE) stole the show with industry-leading revenue growth of 10%. Southwest Airlines (LUV) followed closely at 8% and Alaska Air Group (ALK) at 5% revenue growth.

In contrast, revenues of the three major legacy carriers—Delta Air Lines (DAL), American Airlines (AAL), and United Continental (UAL)—declined by 2%, 5%, and 3%, respectively.

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2015 revenue growth

The same trend can be seen for fiscal 2015. Spirit Airlines clocked the highest rate of 11%, closely followed by JetBlue with a 10% growth. Southwest Airlines recorded a 7% growth and Alaska Airlines had growth of 4%. Delta Air Lines closed 2015 with 1% growth, thanks mainly to the growth seen in 1H15.

Revenues of both American Airlines and United Continental declined by 4% and 3%, respectively. Some of the macro factors also affected revenues negatively.

Strong dollar plays spoilsport

The US dollar has strengthened amid the growing global economic turmoil. This has meant trouble for airlines, especially legacy carriers that operate on international routes. These airlines earn revenues in the local currencies, which means lower dollar revenues.

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Lower fuel surcharges add to woes

Crude prices have declined by more than 60% since their historical highs. This has meant declining fuel surcharge revenue, especially for legacy carriers, which can pressurize revenues.

Declining airfares

Airfares also declined by ~5% in 2015, adding to pressure on revenues. One of the major reasons for the declining airfares were the price wars in 2015, which led to a decline in both passenger yields and industry load factors. Investors can gain exposure to airline stocks through the SPDR S&P Transportation ETF (XTN).

In our next article, we will see why regional carriers could grow their revenues at a much higher pace.

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