FINAL A4A 1Q12 Review and Summer Outlook
Transcript of FINAL A4A 1Q12 Review and Summer Outlook
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John P. HeimlichVice President and Chief EconomistMay 9, 2012
1Q 2012 Review and Summer 2012 Traffic Forecast
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A4A Projects 206 Million Passengers to Travel on U.S. Airlines in Summer 2012*Flat Volumes Overall: Record International; Domestic 7 Percent Below 2007 Peak
192.4 184.5 176.2 177.3 179.8 179.4
25.125.7
24.1 25.8 26.3 26.8
0
25
50
75100
125
150
175
200
225
250
200
7A
200
8A
200
9A
201
0A
201
1A
2012F
International
Domestic
M
illions*
* Summer constitutes the period June 1 through August 31; data reflects onboard passengers traveling in scheduled service per DOT T100 segment database
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217.6 210.2 203.1 206.1 206.2200.3
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Rising Costs Forcing U.S. Airlines to Continue Capacity Reductions in 2012Domestic ASMs in 4Q Scheduled at 12 Percent Below Pre-Recession Levels
(1.0)
(0.1)
0.7
(0.9)
1Q12 2Q12 3Q12 4Q12
Source: Innovata (via Diio Mi) published schedules as of May 4, 2012; an ASM is one seat flown one mile
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186.2
164.1
4Q07 4Q12
Scheduled Domestic (ASMs):Year-Over-Year Change (%)
Scheduled Domestic ASMs (Billions):Five-Year Comparison
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U.S. Airlines Adding Capacity to Most Continents in 2012Notable Exceptions: Europe and the Middle East
(0.8)
13.1
19.5
(7.2)
84.872.9
7.0
51.5
Source: Innovata (via Diio Mi) published schedules as of May 4, 2012
* Scheduled U.S. airline flights departing U.S. airports for other continents; an ASM is one seat flown one mile
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Change (%) in Scheduled Available Seat Miles* (ASMs) from the USA: 4Q 2012 vs. 4Q 2011
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1Q 2012 U.S. Airline* Losses Worsened, Constituting 5.2 Percent of RevenuesDespite 8.2 Percent Stronger Revenue, Profits Shrank on 10.3 Percent Higher Costs
* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways
1Q 2012 Better/(Worse) Than 1Q 2011*
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Year-Over-Year Change Percent
Operating Revenues 8.2
Operating Expenses (6.9)
Fuel (19.1)
Wages and Benefits (4.2)
Other (0.4)
Other Income/(Expenses) (118.5)
Net Income (73.6)
(3.2)
(5.2)
1Q 2011 1Q 2012
Net Profit Margin (%)
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1Q U.S. Airline* Losses Persist, Led by AMRNegative Profit Margin Prevails, in Stark Contrast to Other Fortune 500s
* A4A analysis of reports by Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest/AirTran, Spirit, United and US Airways
airlines.org6
U.S. Airlines* 1Q 2012
Net Income ($ Millions) (1,731)
Net Margin (Percent) (5.2)
Apple Inc. 1Q 2012
Net Income ($ Millions) 11,622
Net Margin (Percent) 29.7
U.S. Airlines* ex. AMR 1Q 2012
Net Income ($ Millions) (55)
Net Margin (Percent) (0.2)
Ford Motor Company 1Q 2012
Net Income ($ Millions) 1,396
Net Margin (Percent) 4.3
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Jet Fuel in 2012 Running 7 Percent Higher Than in Same Period of 2011High Crude-Oil Price Plus Refining Crack Spread*
$95
$100
$105
$110$115
$120
$125
$130
$135
$140
$145
3-Jan-12
19-Jan-12
4-Feb-12
20-Feb-12
7-Mar-12
23-Mar-12
8-Apr-12
24-Apr-12
10-May-12
26-May-12
11-Jun-12
27-Jun-12
Price per Barrel (Five-Day Moving Average)
Jet Fuel
WTI Crude
Brent Crude
Source: A4A and EIA (for WTI and Brent crude oil and U.S. Gulf Coast jet fuel) * Refining margin (difference between jet-fuel and crude-oil price)
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$0.
54
$0.
58
$1.
02
$2.
17 $
3.
00
$3.
20
199
1-1995
199
6-2000
200
1-2005
200
6-2010
2011
YT
D2012
Price per Gallon (Gulf Coast Jet Fuel)
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htmhttp://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htmhttp://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htm -
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Product (Unit) 2000 2011 % Change
College Tuition: Public (Year) $3,508 $8,244 135.0Gasoline (Gallon, Unleaded) $1.51 $3.53 133.8
Eggs (Dozen, Grade A, Large) $0.91 $1.77 94.5
College Tuition: Private (Year) $16,072 $28,500 77.3
Baseball Game (Nonpremium MLB Ticket) $16.22 $26.91 65.9
Movie Ticket $5.39 n/a n/a
Prescription Drugs (Index) 285.4 425.0 48.9
Single-Family Home (New) $169,000 n/a n/a
U.S. CPI (All Urban Consumers)1 172.2 224.9 30.6
Vehicle (New) $24,923 n/a n/a
Air Travel (Round-Trip Domestic Fare + Fees)2 $317 $364 15.0
Air Travel (Round-Trip Domestic Fare Only)2 $314 $343 9.2
Apparel: Clothing/Footwear/Jewelry (Index) 129.6 122.1 (5.8)
Television (Index) 49.9 6.6 (86.8)
Unlike Many Goods/Services, Price of Air Travel Has Not Kept Pace with U.S. InflationAdjusted for Inflation, Domestic Fares Have Fallen 16.4% (12.0% incl. Fees) Since 2000
1. Bureau of Labor Statistics measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services .2. A4A analysis of data collected by the Bureau of Transportation Statisticsexcludes taxes; fees include reservation change fees and baggage fees
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U.S. Inflation Continues to Outpace the Price of Air Travel on U.S. AirlinesAverage Domestic Revenue* and Taxes Collected per Round-Trip Passenger
$186
$288
$314
$343
1979
1990
2000
2011
Airfare Fees Taxes
* Airline revenue includes airfare, baggage fees and reservation change/cancellation fees as collected and reported per domestic round-trip origin-destination passenger
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$202
Sources: DOT O&D Survey (Data Bank 1A) and Bureau of Labor Statistics for the Consumer Price Index (CPI)
$312
$356
$419
U.S. CPI(1982-84 = 100)
$186
$335
$442
$577
Airfare Fees Taxes
If fares kept pace with inflation
$202
$363
$478
$625
72.6
130.7
172.2
224.9
Actual (as collected)
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htmhttp://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htmhttp://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htm -
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Revenue Gains from Ancillary Services SlowingBut Continues to Help Defray a Portion of Rising Operating Costs
Sources: A4A analysis of data provided by Alaska, American, Delta, JetBlue, Southwest/AirTran, United and US Airways
$6.32
$8.60
$9.52
$9.68
$9.97
2008
2009
2010
2011
YTD 2012
Systemwide Ancillary Revenue Collected per Passenger per Segment Flown
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Only One U.S. Passenger Airline Has Investment-Grade Credit
Exx
onMobil
M
icrosoft
GE
W
al-Mart
Toyota
BP
eBay
St
arbucks
Q
ANTAS
Lu
fthansa
So
uthwest
Alaska
A
llegiant
BritishAir
GOL
TAM
Delta
United
Air
Canada
JetBlue
SAS
US
Airways
American
AAA
AAA
AA+
AA
AA-
A A A-BBB
BBB-
BBB-
BB-
BB-
BB-
B+
B+
B B B-B-B-B-D
< BBB- (speculative grade)
>= BBB- (investment grade)
Source: Standard and Poors
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