FINAL A4A 1Q12 Review and Summer Outlook

7/30/2019 FINAL A4A 1Q12 Review and Summer Outlook

1/12

John P. HeimlichVice President and Chief EconomistMay 9, 2012

1Q 2012 Review and Summer 2012 Traffic Forecast


2/12

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

airlines.org2

217.6 210.2 203.1 206.1 206.2200.3


3/12

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

airlines.org3

186.2

164.1

4Q07 4Q12

Scheduled Domestic (ASMs):Year-Over-Year Change (%)

Scheduled Domestic ASMs (Billions):Five-Year Comparison


4/12

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

airlines.org4

Change (%) in Scheduled Available Seat Miles* (ASMs) from the USA: 4Q 2012 vs. 4Q 2011


5/12

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*

airlines.org5

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 (%)


6/12

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


7/12

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)

airlines.org7

$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


8/12

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

airlines.org8


9/12

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

airlines.org9

$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


10/12

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

airlines.org10


11/12

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

airlines.org11


12/12

www.airlines.org

FINAL A4A 1Q12 Review and Summer Outlook

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