3rd Quarter Earnings
Terry Maxon of the Dallas Morning News has a summary of 3rd Quarter Earnings that brings clear light to how airlines have done these past 3 months. Before going further, let me say that both companies and pundits like to exclude special items from their analysis of earnings. It is the airlines’ way of saying “Yeah But!”
Yeah, but if we had not screwed up on our hedges, we would have made this much. Yeah, but if we had not had to pay off a bunch of senior employees to leave, we would have made this much.
I don’t like Yeah Buts. Special items occur every month, every quarter and every year. More so than ever before. It’s time to accept that it is what it is regardless of how special items affect performance. Now on to a few observations:
Delta Airlines is doing exactly what CEO Richard Anderson said was necessary in the airline industry. They are raising their margins considerably to truly cover their capital costs as well as their operating costs. Well done. Very, very well done. Admittedly, they are farthest down the road in the New World Order of consolidation but it is a consummate performance nonetheless.
Alaska Airlines: Ditto! They are playing their game perfectly right now.
Hawaiian Airlines: Again, well done and particularly so in light of where their market was just a few short years ago when it comes to competition. Yes, they face less complex challenges than continental US airlines but they still are performing well.
US Airways: I’ve already said it once this week. These guys know how to run an airline and earn a profit even under trying circumstances. They make a better case for merger with their financial results than any PR machine could make publicly in the news.
United Airlines: It’s time for these guys to get a little more on the ball. One begins to sense a certain lag in realizing their synergies and having a seamless system. Special items shouldn’t be killing your entire net income at this point.
JetBlue: Nice job but kind of a yawn. We’ve been seeing roughly the same level of performance for years with no substantial growth whatsoever. I’d rather have Alaska Airlines than JetBlue at this point.
Southwest: I think their recent performance reflects their merger. What I think hasn’t been brought up but should be is that their merger isn’t exactly brand new at this point and the lag is primarily due to how ill equipped they were to absorb another airline with respect to their systems. Consider this: SWA has made noise about how their IT systems impact their ability to do business with the rest of the world for a bit over 5 years. They are operationally seeking to do business with the rest of the world in many different ways and they are certainly changing the way they operate to be more in line with a legacy airline. SO WHY HASN’T THE IT PROBLEM BEEN ADDRESSED AGGRESSIVELY AT THIS POINT?
American Airlines: B’ah. Even with artificially contained costs and a fairly friendly bankruptcy judge, they continue to lose money. What’s the definition of insanity? Doing the same thing over and over again expecting a different result?
Summary: It’s no surprise that the two top performers are also partners and close ones at that. These are airlines that know what they’re doing and who exercise strict discipline in operating their airlines. Yes, I’m talking about Alaska Airlines and Delta.
No one is talking about growth, everyone is talking about capacity restraints and raising margins. Well, all except American Airlines. That alone speaks volumes.
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