This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Airline Industry Braces for Lower Unit Revenue Growth

CHARLOTTE ( TheStreet) -- The airline industry is set to start reporting unimpressive unit revenue growth numbers and analysts continue to reduce earnings estimates.

Delta (DAL - Get Report) will lead off the September traffic reporting on Tuesday: Barclays Capital analyst David Fintzen said he expects Delta will report that passenger revenue per available seat mile increased by 1% to 3%. That would be at the high end. Fintzen expects US Airways (LCC) to report a gain of 1% to 2%.

JP Morgan analyst Jamie Baker expects United (UAL - Get Report) to report PRASM between minus 2% and minus 4%, based on the disappointing guidance > United issued last week. Fintzen expects industry PRASM growth of about minus 1% and said September should mark the low point.

"We expect September to mark the lows for RASM growth this year, with improving trends a function of easing comparisons and, we suspect, slightly improving sequential trends," Fintzen wrote, in a recent report. "Our expectations for a return towards mid-single digit RASM growth in 4Q assumes 1.5 ppts of underlying revenue acceleration, with the industry on pace for 4% RASM growth given current demand levels."

For the third quarter, CRT Capital Group analyst Mike Derchin expects the industry to report overall third-quarter PRASM growth of 1.8%, compared with 6.3% in the same quarter a year earlier. He said the fourth quarter should bring industry growth of 3.4% "against more normal comparisons."

"In hindsight, the excise tax holiday and Hurricane Irene last year was worth about 200 basis points in PRASM growth," Derchin wrote. "Also, the timing of the July 4 holiday and Jewish holidays negatively impacted business travel this year."

Derchin said the industry earnings outlook has diminished due to the rise in fuel prices and slowing unit revenue growth.

"The main change we have decided to incorporate in our earnings models is to assume that continuing political uncertainty in the Middle East and weak dollar results in WTI crude oil trading toward the top end of the recent $85 to $100 per barrel range," Derchin wrote, in a recent report. "We now expect a net profit of $2.1 billion in 3Q12 compared with $1.8 billion for 3Q11 and our prior forecast of $3.5 billion."

Derchin continued: "If jet fuel prices remain elevated, we expect airlines to adjust capacity downward again and push prices higher, particularly during peak travel times. We are forecasting that it won't be until 1Q13 that the current jet fuel spike is fully offset by carrier actions."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
LCC $0.00 0.00%
ALK $70.47 -2.10%
DAL $41.43 -3.30%
UAL $45.81 -4.70%
AAPL $93.34 -1.60%


Chart of I:DJI
DOW 17,707.01 -123.75 -0.69%
S&P 500 2,056.81 -19.00 -0.92%
NASDAQ 4,763.4210 -41.87 -0.87%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs