We're now well into the second quarter, and almost all US airlines have revealed their first quarter results, and have had their earnings calls. Sometimes it's interesting to take a look at the state of the US airline industry, and how airlines are doing. This isn't intended to be a deep dive into US airline…
Continue reading: How Did US Airlines Do In The First Quarter Of 2019?
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Lucky I know you are at war with American...but Alliegant is shocking to me. Looks like that 60 minutes report on their safety didn’t effect them. Of course if you don’t spend any money on safety your margins would be higher.
@ Charles S -- Hah, not at war with American, just pointing out how poorly they're doing, and how nothing is changing. And yeah, agree that it's surprising that Allegiant does so well still.
Waiting for HenryLAX to come up and defend UA by pointing out DL only makes a 4% margin at JFK and UA is higher at EWR
Hi Ben,
Operating margins are meaningless in this industry; what's important is return on investment. Airlines like Spirit and Frontiers do an awful job at generating revenues for each plane they have, so you're comparing apples and oranges when you're comparing margins. An airline like Delta can make more money to investors with a much smaller margin, since they get more revenues.
An airline that for each dollar of investor money is able to make 1 in revenue and 0.10 in profit (10% margin) is far more profitable than one that earns 0.60 in revenue and has a margin of 15% (0.09 in profit)
Even though the grounding came relatively late in the quarter, the ground of the MAX 8's is a cost factor for AA.
Also, the huge volatility of oil prices in the quarter make it conceivable that high (low) profits are a result of good (bad) luck. That is, it's conceivable that some airlines were ex ante too conservative and over-hedged. But it turned out that oil prices shot up more than expected. So those overly conservative airlines lucked out.
I'm not saying I'm right. But stories such as that one need to be looked into as oil prices moved a lot and they are highly important for an airline's bottom line.
Allegiant makes a ton of money on the non-airline part of their business being a travel agency
American will never loose money again???wait till the US go at war with Iran and rocket oil price will give this stupid CEO of American never say never again.
I read Skift Airline Weekly and all they talk about is operating margin. Even on investor calls, airlines talk about increasing operating margin. I'm not saying it's the right metric, but the industry is measured against it pretty heavily. United has mentioned they want to close the operating margin gap they have with Delta.
I can't being myself to fly Allegiant even after they replaced the old Mad Dogs with more gently pre-owned Airbuses. But I price their tickets every so often and unless you get in on one of their handful of cheap tickets on each flights, the ticket price isn't that different from an economy ticket on the legacy carriers, and many infrequent leisure flyers will pick them because it's a non-stop route and having to connect through Chicago or Atlanta or something is 'scary'.
If Spirit is the Ryanair of the Americas, then Allegiant is trying to become Thomas Cook with not only its travel packages but also buying or developing resort real estate in areas like Southwest Florida. They're also doing other projects like paying cash for a new five gate terminal at their summer hub of VPS (Destin- Ft. Walton Beach/Northwest Florida Regional/Eglin AFB or whatever that airport is called this week) with the airport to pay them back for the construction project with their passenger use fees. I haven't read through the agreement yet, but somehow I suspect that they are not giving the county & airport authority a 0% loan on the project.
Allegiant is also pretty active on the charter side. I've got a cousin's kid who is a cheerleader for a Big Ten school and a number of pictures of her standing in front of an Allegiant jet in connection with an away game have hit my social media feed.
I still wish that the 'big new airline announcement' for VPS a few years back had been Jet Blue instead of Allegiant and am not really interested in flying on a ULCC like them, but I do see them as benefiting my local economy and they also seem to be creating some modest price pressure and competition in an area where airfares have typically been on the high side because of limited choice in the past.
It’s interesting to compare WN to AA. WN has more Max 8’s than AA, and is subject to the same weather issues, but it’s profit is twice AA’s. It’s crystal clear AA is broken as an operating airline. Hoping the board will send Parker and his band of America West cronies packing soon before the problems become unfixable. Blaming the anemic first quarter on the grounding of a small sub fleet of 737’s is just sad.
Remember Delta has a very old fleet while AA, Jet Blue and Alaska have much newer aircraft that they’re carrying debt on.
Judging an airline, especially Alaska, just by one quarter, with the first quarter typically the worst quarter of the year, is silly. This ignores the seasonality of their route system. More than most, summer is their peak season with markets such as Alaska, Hawaii, the Pacific Northwest, and California all strongly peaking in summer and being in the doldrums in winter. A trailing twelve months look taking out seasonality would be a more accurate look at performance.
Allegient maintenance exceed the FAA mandates. At the end of the day you can spend more money to greatly exceed FAA mandates or just enough to surpass them. Are you going to be that much safer? Most fliers will look at a tattered interior and assume the plane is in poor shape and complain that its not safe.
Given how lucrative FF programs are (keeping AA alive?) and given Alaska's poor bottom line, it would seem logical for Alaska to restore it's not-too-dreadful program to is former glory.
There is so much trickiness with awards offered on their own metal, and partner awards.
Losing partners altogether, and picking up the premium scraps thrown their way (thinking QF), and dressing up awards that verge on dishonesty is not the way to endear themselves to the flying public. I really, really want to love Alaska MileagePlan, but am finding it heavy going at the present time.
It is sad to see the harm Doug Parker has inflicted and continues to inflict upon AA, its passengers, employees, and shareholders. It is hard to recall a CEO who has missed this big, this often, lagged his competitors so severely, lost the goodwill of every constituency, and yet still keeps his job. AA is a slowly unfolding tragedy.
Jake, I’m having a hard time understanding your post. It ignores the number of shares outstanding, EPS and market capitalization. The margins are extraordinarily important to investors, as earning drive price.
It is most certainly not comparing apples to oranges.
A lot of people are shocked that anyone uses Allegiant and pluses and minuses added up, it's a a bargain. But it's humiliating. The bad part is what it says about our nation in the post-regulation era. When non-glamorous, smaller cities get Allegiant flights they are being reminded, "You no longer count. You're dying town with cold weather. Truly, you're lucky even a no-frills airline wastes fuel on you. Where are all the other carriers, huh? But since we're doing it, we're going to extract every last bit of your traveling dignity from you. If anybody complains, the city fathers will howl. They use our presence to lure industry. So have a nice trip. We're sure we'll see you again. How else are you going to fly in or out of Elmira?"