Midwest Aug. Traffic Rises 28.2 Percent

Old Sep 13, 2007, 7:33 am
  #1  
Original Poster
 
Join Date: Feb 2007
Location: MKE
Programs: Midwest Miles, AirTran A+ Rewards
Posts: 1,445
Midwest Aug. Traffic Rises 28.2 Percent

http://biz.yahoo.com/ap/070913/midwe...ffic.html?.v=1

AP
Midwest Aug. Traffic Rises 28.2 Percent
Thursday September 13, 9:09 am ET
Midwest Air Group Traffic, Capacity and Occupancy Rise, Revenue Does Not Keep Up Pace


MILWAUKEE (AP) -- Midwest Air Group Inc. said Thursday its traffic, capacity and occupancy rose in August as summer demand for air travel remained strong, though revenue did not keep pace with the increases.
ADVERTISEMENT


Midwest's traffic rose by 28.2 percent to 463.9 million revenue passenger miles from 361.7 million a year earlier. A revenue passenger mile is an industry unit measuring one paying passenger flown one mile.

Its capacity rose by 22.8 percent to 565.6 million available seat miles from 460.5 million in August 2006. An available seat mile factors in the number of seats available and the number of miles flown.

Occupancy rose to 82 percent of seats filled from 78.6 percent.

However, Midwest said its estimated revenue per available seat mile fell 1.6 percent, to 12.49 cents from 12.69 cents. That metric represents revenue for each seat flown one mile.

August results for its Midwest Airlines and Midwest Connect subsidiaries mirrored overall results, with traffic, capacity and occupancy increases but drops in revenue per available seat mile. Traffic and capacity at Midwest Connect, its smaller operation, more than doubled, but revenue per available seat mile dropped 30.8 percent.

For the year through August, Midwest's traffic rose 16.7 percent to 3.25 billion revenue passenger miles from 2.79 billion during the same period in 2006. Its capacity rose 13.4 percent, to 4.07 billion available seat miles from 3.59 billion. Its occupancy rose to 80 percent of seats filled from 77.7 percent.


Good news for Midwest but revenue is still down. I wonder how Midwest is going to address the revenue problem?
flyYX is offline  
Old Sep 13, 2007, 8:52 am
  #2  
 
Join Date: Jan 2007
Location: Chicago
Posts: 1,800
Originally Posted by flyYX
[url]http://biz.yahoo.com/ap/070913

Good news for Midwest but revenue is still down. I wonder how Midwest is going to address the revenue problem?
That's the real problem facing Midwest and many other airlines.

Looking at the numbers released today, I continue to be amazed at how poorly the Midwest Connect side of the business is performing revenue wise. Yields have declined fairly significantly. Some of that can be explained by longer stage lengths of the flights, cancellations from crew shortages, and the fact that the Beech 1900s are still around. Also, the FRJ 328 jets aren't exactly cheap to operate, either.

During the last earnings conference call, Midwest said that Skyway lost money during the second quarter. However, the Skywest flying has been profitable from the outset. Based on what we've seen so far for quarter three, I'm expecting that trend to continue.

It's no wonder that markets like Lansing, Marquette, and LaCrosse have all been discontinued recently.
BlueHorseShoe2000 is offline  
Old Sep 13, 2007, 12:26 pm
  #3  
Original Poster
 
Join Date: Feb 2007
Location: MKE
Programs: Midwest Miles, AirTran A+ Rewards
Posts: 1,445
Originally Posted by BlueHorseShoe2000
That's the real problem facing Midwest and many other airlines.

Looking at the numbers released today, I continue to be amazed at how poorly the Midwest Connect side of the business is performing revenue wise. Yields have declined fairly significantly. Some of that can be explained by longer stage lengths of the flights, cancellations from crew shortages, and the fact that the Beech 1900s are still around. Also, the FRJ 328 jets aren't exactly cheap to operate, either.

During the last earnings conference call, Midwest said that Skyway lost money during the second quarter. However, the Skywest flying has been profitable from the outset. Based on what we've seen so far for quarter three, I'm expecting that trend to continue.

It's no wonder that markets like Lansing, Marquette, and LaCrosse have all been discontinued recently.
Then we can assume the purchase of new regional jets for Skyway is just as important as a purchase of mainline aircraft for Midwest Airlines?
flyYX is offline  
Old Sep 13, 2007, 12:36 pm
  #4  
 
Join Date: Sep 2004
Location: BDL
Programs: NWA Platinum, HHonors Diamond, SPG, YX, AA
Posts: 5,351
I would guess the "best" Skyway routes went to Skywest, leaving the less attractive routes for the B1900 and FRJs to fly on!
MKEbound is offline  
Old Sep 13, 2007, 7:03 pm
  #5  
FlyerTalk Evangelist
 
Join Date: Mar 2000
Posts: 17,378
Originally Posted by BlueHorseShoe2000
That's the real problem facing Midwest and many other airlines.
No, it's actually a problem pretty much unique to YX at the moment. Most airlines posted fantastic RASM increases in August -- one of the best monthly increases in the history of US commercial aviation. JetBlue was over 10%. Frontier was above 9%. Continental was something like 8%. USAirways almost that much. The other carriers haven't released RASM numbers yet, but they will be similarly stunning (especially AirTran, which had mind-bogglingly good August traffic increases).

The reason YX's stunk is because they added a lot of stupid capacity. Why did they do it? It's a no-brainer: they were trying to invent an alternative strategy to thwart the AirTran acquisition. AirTran (and most industry analysts) said the strategy was dumb, but remember Hoeksema was willing to try ANYTHING to keep his job and thwart AirTran's bid.

Now that he has a white knight (assuming the deal goes through), look for the new money-losing capacity to come out.
iahphx is offline  
Old Sep 16, 2007, 8:55 pm
  #6  
 
Join Date: Oct 2004
Posts: 2,653
The current year-over-year decline in revenue per available seat mile for Midwest and Midwest Connect are quite expected and not the sign of catastrophy. Why? Because of the signficant shift of flying fromm shorter haul to longer haul. Longer-haul flying has lower revenue...and lower costs.

The increase in average trip in August sounds relatively small at +8.3%. In fact that represents a significant shift. Here are the details, and how they affected revenue.

Here are the markets where Midwest mainline did less weekday flying in August, 2007 than in August, 2006, including the yield in cents per mile:
orig dest miles seats yield
MCI PIT .. 777 . -88 19.38
MKE EWR 739 -352 25.68
MCI SAT . 708 -186 22.20
MKE PHL . 690 -176 22.51
MKE ATL . 671 . -88 19.63
MKE MSP 297 -264 61.15

Weighted average of this reduced flying:
623 miles
27.38 cents per mile yield

Here are the markets where 2007 saw more August flying than 2006, again with stage length, seats and yield

orig dest miles seats yield
MKE LAX 1748 143 10.54
MKE SEA 1696 143 11.92
MCI SEA 1525 .. 88 12.96
MCI SFO 1498 .. 88 12.23
OMA .. LAX 1329 .. 88 13.65
MCI BOS 1255 .. 88 14.49
MKE FLL . 1243 .. 88 11.61
MCI RSW 1155 .. 88 12.04
MCI LGA . 1094 .. 88 19.18
MKE TPA 1075 .. 88 12.72
MCI MCO 1075 .. 88 13.12
MKE MCO 1069 143 15.21
MKE DEN .. 895 ... 30 16.63
MKE MCI .. 436 ... 88 46.80

Weighted average of this added flying year-over-year:
1269 miles
13.81 cents per mile yield


For a comparably small airline like Midwest, these changes are rather significant. The removed 2006 flying represted 10% of the ASM's in August 2006. The added 2007 flying represents nearly 21% of the ASM's in August 2007.

These numbers are for illustration and won't pefectly foot out to actual 2007 stats because they are weekday-only stats, they are 2006 actual local fares, and they don't account for difference in traffic composition (local vs conx). But they pretty clearly illustrate how much the structural change of Midwest's route system impacts yield. And it makes year-over-year comparisons problematic.

Midwest's route system structural changes have some predictable effects:

All else equal, this change should produce a notable drop in yield year-over year. That's simply from the added long-haul flying and reduction in shorter-haul flying. And they did see just that.

All else equal, Midwest should generally see an increased load factor since their long-haul flying runs above-average load factors. And they did see just that.

All else equal, Midwest should see a corresponding decrease in direct operating cost due to the lower cost-per-mile of long-haul flying. We won't be able to see if this came about until quarterly financials come out.

I doubt there's any other airline which saw nearly this much increase in their length of haul year-over-year, and if they did it likely wouuld have lowered their yield as well.

Revenue per available seat mile is simply yield combined with load factor. Most everybody's load factor is up year-over-year, more than enough to mask changes in yield (good or bad). But Midwest's yield was down enough -- at least in part due to the increased long-haul flying -- that RASM was lower than last year.

The same structural change in Midwest's flying that reduced yield and thus RASM had a similarly positive effect on cost. To lament a structurally-induced drop in RASM witnout recognizing that same structural change also benefits cost is missing half the story.

We can't know specifically how much Midwest's route structure change affected the decreased yield, versus how much is due to improving or weakening fares. But I think comparing May to August tells us something:

Midwest revised their earnings outlook and warned of a weakened fare environment in May. Here are May's stats, including year-over-year change:

May
Yield 11.97 (-8.7%)
RASM 11.09 (-6.7%)

Note that much of the Midwest network structural change I talked about earlier had not yet happened in May. So the pressure on yield and RASM in May was less affected by increase in haul. At about the same time as Midwest's warning of a weaker fare environment, a number of other carriers including Continental, JetBlue, Northwest, and USAirways reported weakness.

Compare May to August, with the full effect of added long-haul flying described above, in place:

August
Yield 11.99 (-7.6%)
RASM 11.29 (-2.9%)

Many of Midwest's route structure changes took place between 6/1 and 8/1, so if the spring weakness continued, actual numbers and year-over-year comparison should have looked a good deal worse in August than May. Yet it was a notch better. And so I suspect the fare environment has improved for Midwest this summer just as it has for Continental, JetBlue, Northwest, USAirways, and others. Midwest's change in route structure masks theres.

I won't go into any great detail on Midwest Connect, but their year-over-year comparisons are virtually meaningless. With RPM's up 158% year over year, length of haul up 36%, and nearly as many CRJ's as FRJ+BE1, it is a different airline. The large drop in yield and RASM refelcts this. There will definitely be a large drop in cost as well from longer hauls and large aircraft.

In neither case...Midwest nor Midwest Connect...do we know if the drop in cost will equal or exceed the drop in RASM that the structural changes have lead to. The net could indeed be worse...we don't know. But I think it is incorrect to compare Midwest's year-over-year RASM to other airlines without recognizing the big affect structureal changes in the Midwest and Midwest Connect route system, and how those also benefit the cost side.
knope2001 is offline  
Old Sep 17, 2007, 9:09 am
  #7  
 
Join Date: Mar 2006
Programs: AS,UA
Posts: 595
Wow, that is an excellent analysis, how do you get this data Knope?

Now that i see MCI-MKE has the highest yield, i really wish they would lower the price on that flight to 100 bucks RT all the time, cause i would be flying it every weekend
lebowski2222 is offline  
Old Sep 17, 2007, 1:17 pm
  #8  
Original Poster
 
Join Date: Feb 2007
Location: MKE
Programs: Midwest Miles, AirTran A+ Rewards
Posts: 1,445
As always Knope has facts and figures to backup his comments. I look forward to reading your posts here and on a.net. Thanks!
flyYX is offline  
Old Sep 18, 2007, 2:38 pm
  #9  
 
Join Date: Oct 2004
Posts: 2,653
Originally Posted by lebowski2222
Wow, that is an excellent analysis, how do you get this data Knope?
The market capacity increase/decreas info came from their schedule.
Mileage and yield came from various tables in the quarterly DoT stats linked below. They have fare and distance, but yield is a clean calculation with those two fields.

http://ostpxweb.dot.gov/aviation/X-5...farereport.htm

A bunch of relatively straightforward formulas and calculations in Excel based on these stats produced the numbers I posted. It can be pretty cumbersome, time consuming, and take a decent amount of thinking things through, but it's all arithmetic.
knope2001 is offline  

Thread Tools
Search this Thread

Contact Us - Manage Preferences - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service -

This site is owned, operated, and maintained by MH Sub I, LLC dba Internet Brands. Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Designated trademarks are the property of their respective owners.