UA reports highest increase in revenue per passenger mile flown in March
Apr 10, 2013, 1:16 pm
#46
Join Date: Aug 2006
Location: US
Programs: AA/UA/DL
Posts: 2,773
---
A girl pushed her ex-boy friends away and didn't want their loyalty.
She keeps doing ugly things to her ex-boys.
Then, most of her ex-boys start to criticize every inch of her.
Finally, one day, she complains to her friends and says " I earn more money than before and I also lose 10 pounds
( I was the fattest girl in the world.), why don't they ride me anymore and why do they keep criticize me so much?
She can't get it. She and her friends just can't get it. She still think that as long as she can keep losing weight, she can attract
other people.
Last edited by pigx5; Apr 10, 2013 at 1:43 pm
Apr 10, 2013, 1:34 pm
#47
Join Date: Jun 2005
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Apr 10, 2013, 1:36 pm
#49
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Apr 10, 2013, 4:55 pm
#50
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We were all expecting a positive YOY PRASM, but that's not the point. It's the magnitude of the "6.5-7.5%" increase that UA is reporting, which no other airline is coming anywhere close to.
Additionally, we are expecting that UACO will post a higher than expected loss in 1Q13. If PRASM keeps going up, yet total revenues are no longer covering total costs, this might suggest that UACO is over-reducing capacity and that the gains in marginal revenues cannot offset the high fixed costs. -- Still way too early to say if this is true.
Additionally, we are expecting that UACO will post a higher than expected loss in 1Q13. If PRASM keeps going up, yet total revenues are no longer covering total costs, this might suggest that UACO is over-reducing capacity and that the gains in marginal revenues cannot offset the high fixed costs. -- Still way too early to say if this is true.
Apr 10, 2013, 5:01 pm
#51
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Of COURSE no other airline is coming close to it - no other airline drastically cut capacity in March '12, had customers booking away due to a computer cutover, had sub-par operations, etc.
Apr 10, 2013, 5:03 pm
#52
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[QUOTE=sinoflyer;20570745]We were all expecting a positive YOY PRASM, but that's not the point. It's the magnitude of the "6.5-7.5%" increase that UA is reporting, which no other airline is coming anywhere close to.
Wrong again. JetBlue just announced an 8.6% increase in traffic COMBINED with a 7% increase in yield.
Wrong again. JetBlue just announced an 8.6% increase in traffic COMBINED with a 7% increase in yield.
Apr 10, 2013, 5:19 pm
#53
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Yes.
It's mis information anyway. The MD-80s that AA has left in in it's fleet average 15-20 years in age, no where close to 30.
Now back on topic, one of course would expect a pretty signifant bump in unit revenue after last year's March. We'll see how year end comes out and how successful UA has been in winning back folks. This one month no conclusions can be made.
---
A girl pushed her ex-boy friends away and didn't want their loyalty.
She keeps doing ugly things to her ex-boys.
Then, most of her ex-boys start to criticize every inch of her.
Finally, one day, she complains to her friends and says " I earn more money than before and I also lose 10 pounds
( I was the fattest girl in the world.), why don't they ride me anymore and why do they keep criticize me so much?
She can't get it. She and her friends just can't get it. She still think that as long as she can keep losing weight, she can attract
other people.
It's mis information anyway. The MD-80s that AA has left in in it's fleet average 15-20 years in age, no where close to 30.
Now back on topic, one of course would expect a pretty signifant bump in unit revenue after last year's March. We'll see how year end comes out and how successful UA has been in winning back folks. This one month no conclusions can be made.
---
A girl pushed her ex-boy friends away and didn't want their loyalty.
She keeps doing ugly things to her ex-boys.
Then, most of her ex-boys start to criticize every inch of her.
Finally, one day, she complains to her friends and says " I earn more money than before and I also lose 10 pounds
( I was the fattest girl in the world.), why don't they ride me anymore and why do they keep criticize me so much?
She can't get it. She and her friends just can't get it. She still think that as long as she can keep losing weight, she can attract
other people.
Apr 10, 2013, 5:28 pm
#54
Join Date: Jul 2010
Location: NYC, SLC, LAX
Programs: AA EXP, UA Plat
Posts: 3,951
There is nothing special about 7% YOY PRASM increase when your comp is AN INCREDIBLY PISS-POOR AWFUL MONTH.
Of COURSE no other airline is coming close to it - no other airline drastically cut capacity in March '12, had customers booking away due to a computer cutover, had sub-par operations, etc.
Of COURSE no other airline is coming close to it - no other airline drastically cut capacity in March '12, had customers booking away due to a computer cutover, had sub-par operations, etc.
Apr 10, 2013, 5:32 pm
#55
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AA Y/Y comparison this coming October/November will be even better!
Apr 10, 2013, 7:19 pm
#56
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There was a lot of discussions of these numbers here: http://www.flyertalk.com/forum/unite...ill-wider.html
Its amazing to me that many of the same posters who tried to defend UA in that thread, had their arguments shot down, are now back saying the same things.
Some explanation (made in the earlier thread) may be helpful:
First, UA had very different numbers re ASM in March 2013. UA was (4.6%), DL was (.6%), LCC was +3.2%, AA was + .1%. The statement that everyone cut made by earlier posters is just false. UA chopped its capacity in March, and we all know that gives a short term boost to PRASM not only in higher load factor but also in being able to sell more last minute tickets to your elite fliers who may just pay (e.g. the SFO-SEA flight I got just offered by UA at $476 o/w, I booked on AS for $202). However, over time you lose fliers by doing this as they either bail due to price, lack of seats, or small (RJ) planes.
Second, The comparables for each airline were very very different, and when one airline had special factors effecting PRASM in the prior year it makes a comparison hard to make, or requires an effort at adjustment. Here there is such a factor due to the change over chaos of Feb/March 2012. The March 2012 PRASM numbers were: LCC: +8%, DL +14%, UAL +4.9%. UA left a lot of traffic on the table in Feb/March 2012, and you would expect their Y/Y numbers to get that back in whole or part. I can't exactly quantify the March 2012 loss. In February 2012 UA said it lost 6% gain in PRASM due to one time factors, and it said its March 2012 PRASM number was 1% less due to shares under booking. However, if it was near the higher number given for February, then these numbers look really really bad. If it was closer to 1%, then don't look as bad, but did it in a bad (ASM slash) way.
Third, UA should be gaining from the $1.2B in synergies from the merger, including extra traffic due to its larger network and ability to hold traffic on network in the March 2013. They will start to get that boost, which means if they are not losing folks in droves UAs numbers ought to be yet better.
Fourth, and finally, there are good explanations (that are one time events for March 2013) that caused AA/LCC and DL (But not Jet Blue or AS) to under perform.
UA continued to discount its fares throughout March, while AA and US in particular DL used less discounting. All three were assuming that they could then sell those seats for more money close in. DL in particular was using a new revenue system. But with the sequester everyone (expect notably UA) reported that they saw a drop off in close in (high expense/expensive) ticket sales at the end of the month. Since UA had already sold more tickets, and cut its ASM dramatically, it ended up with a better PRASM gain. I seriously doubt we will see the same issues in April 2013.
Bottom line, these numbers are better for UA than the February 2013 numbers (which were awful given the comps), but they result from a very very large (and unsustainable ASM cut), very easy comps, and misteps by UAs competitors (which UA avoided by heavy and early discounting, not a good long term place to be) which caused them to not get as much late revenue as expected.
I would put this in the category of "winning really really ugly" and not in a sustainable way. UA will only be on a path to recovery when its traffic and revenue are up consistently, and not by dramatic short term ASM cuts, so that UA is able to command more of a yield premium. Nothing in these numbers suggests that this is happening.
April and May 2013 should be free of major issues in the comps (although UAs comps remained soft, the immediate under-booking was gone by end of March 2012 per UA on the 1Q 2012 call) and will provide a better window into whether UA continues to lose HVF/elite traffic, are has started to gain it back.
But as others have said, the losses continue to widen (consensus is now ($1.06/share, twice what the loss was projected to be 3 months ago), and cutting ASMs does not cut costs in the same ratio so it impacts the P/L statement.
Its amazing to me that many of the same posters who tried to defend UA in that thread, had their arguments shot down, are now back saying the same things.
Some explanation (made in the earlier thread) may be helpful:
First, UA had very different numbers re ASM in March 2013. UA was (4.6%), DL was (.6%), LCC was +3.2%, AA was + .1%. The statement that everyone cut made by earlier posters is just false. UA chopped its capacity in March, and we all know that gives a short term boost to PRASM not only in higher load factor but also in being able to sell more last minute tickets to your elite fliers who may just pay (e.g. the SFO-SEA flight I got just offered by UA at $476 o/w, I booked on AS for $202). However, over time you lose fliers by doing this as they either bail due to price, lack of seats, or small (RJ) planes.
Second, The comparables for each airline were very very different, and when one airline had special factors effecting PRASM in the prior year it makes a comparison hard to make, or requires an effort at adjustment. Here there is such a factor due to the change over chaos of Feb/March 2012. The March 2012 PRASM numbers were: LCC: +8%, DL +14%, UAL +4.9%. UA left a lot of traffic on the table in Feb/March 2012, and you would expect their Y/Y numbers to get that back in whole or part. I can't exactly quantify the March 2012 loss. In February 2012 UA said it lost 6% gain in PRASM due to one time factors, and it said its March 2012 PRASM number was 1% less due to shares under booking. However, if it was near the higher number given for February, then these numbers look really really bad. If it was closer to 1%, then don't look as bad, but did it in a bad (ASM slash) way.
Third, UA should be gaining from the $1.2B in synergies from the merger, including extra traffic due to its larger network and ability to hold traffic on network in the March 2013. They will start to get that boost, which means if they are not losing folks in droves UAs numbers ought to be yet better.
Fourth, and finally, there are good explanations (that are one time events for March 2013) that caused AA/LCC and DL (But not Jet Blue or AS) to under perform.
UA continued to discount its fares throughout March, while AA and US in particular DL used less discounting. All three were assuming that they could then sell those seats for more money close in. DL in particular was using a new revenue system. But with the sequester everyone (expect notably UA) reported that they saw a drop off in close in (high expense/expensive) ticket sales at the end of the month. Since UA had already sold more tickets, and cut its ASM dramatically, it ended up with a better PRASM gain. I seriously doubt we will see the same issues in April 2013.
Bottom line, these numbers are better for UA than the February 2013 numbers (which were awful given the comps), but they result from a very very large (and unsustainable ASM cut), very easy comps, and misteps by UAs competitors (which UA avoided by heavy and early discounting, not a good long term place to be) which caused them to not get as much late revenue as expected.
I would put this in the category of "winning really really ugly" and not in a sustainable way. UA will only be on a path to recovery when its traffic and revenue are up consistently, and not by dramatic short term ASM cuts, so that UA is able to command more of a yield premium. Nothing in these numbers suggests that this is happening.
April and May 2013 should be free of major issues in the comps (although UAs comps remained soft, the immediate under-booking was gone by end of March 2012 per UA on the 1Q 2012 call) and will provide a better window into whether UA continues to lose HVF/elite traffic, are has started to gain it back.
But as others have said, the losses continue to widen (consensus is now ($1.06/share, twice what the loss was projected to be 3 months ago), and cutting ASMs does not cut costs in the same ratio so it impacts the P/L statement.
Apr 10, 2013, 8:04 pm
#57
Join Date: Jul 2005
Posts: 2,324
Thank you for spending the time to put your own analysis out there, spin88…I greatly appreciate the thoroughness of your pieces. All too often we have what I term "drive by" analysis, who refuse to back up their proclomations with any substance, choosing to run away and reappear from time to time with snarky remarks. When they do choose to elaborate, the incoherence and shallowness is on full display.
Last edited by iluv2fly; Apr 11, 2013 at 12:53 am Reason: unnecessary
Apr 10, 2013, 8:38 pm
#58
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Posts: 9,341
Capacity Management = One time profit improvement by selling less stuff.
Anyone who thinks that reducing the top line is a long term formula for success is nuts. Might help executive bonuses, but shareholders are stupid to leave these kind of execs in place.
Anyone who thinks that reducing the top line is a long term formula for success is nuts. Might help executive bonuses, but shareholders are stupid to leave these kind of execs in place.