AirKarp

US airlines’ 2Q earnings roundup

RSS

Doug Parker: "Customers care a lot about the price of a ticket and we have to compete on price."

Key points from US airlines’ second-quarter earnings reporting season…

Soft revenue, exceptional profits: American Airlines, Delta Air Lines, Southwest Airlines and United Airlines, which together control more than 80% of the US airline market, earned a combined net profit of $5 billion in the second quarter. That happened despite American, Delta and United seeing revenue fall year-over-year and Southwest reporting just a 2% revenue increase. US airlines continue to control costs (with a big assist from low fuel prices) and prudently manage capacity, which is proving critical in a revenue environment that shows little sign of improvement as the US economy has disappointed so far this year.

Pricing wars: Ultra-low cost carrier Spirit Airlines is no longer being ignored. US mainline airlines are aggressively matching Spirit’s low fares on routes on which they are going head-to-head with the fast-growing ULCC. American is “all-in now in matching ultra-low cost carriers everywhere,” president Scott Kirby said. Spirit CEO Ben Baldanza conceded that the airline’s 14.8% second-quarter year-over-year RASM drop is 40% attributable to “very aggressive” moves by mainline US airlines to match its low fares. American chairman and CEO Doug Parker said, “Customers care a lot about the price of a ticket and we have to compete on price. That’s what we’ll continue to do.”

Delta goes global: News of Delta’s planned purchase of a stake in China Eastern Airlines brought to mind a speech I heard Delta president Ed Bastian give in Rio de Janeiro in 2011. Speaking at the Latin American and Caribbean Air Transport Association (ALTA) Airline Leaders Forum, Bastian said Delta was in the process of transforming from “a US carrier that served global destinations” to “a global airline that serves the US.” Since that speech, Delta has acquired a 3% stake in Brazil’s GOL, a 4.17% stake in Aeromexico, a 49% stake in Virgin Atlantic Airways and now has committed to buying a 3.55% stake in China Eastern.

Peaceful nights: During American’s second-quarter earnings conference call, in which the carrier’s executives discussed what Parker said he believes is “the highest quarterly earnings that any airline has ever produced in any quarter,” American’s management team was asked by a reporter about what keeps them up at night. Parker’s quick response: “We sleep pretty well.”

Please or Register to post comments.

What's AirKarp?

ATW senior editor's blog

Blog Archive