Things in the Sky

Quick post today – for one, I’ve been traveling. Second, my main laptop’s battery is broken, so I’m writing with an Asus Eee netbook. It’s a cool little thing, don’t get me wrong, but typing for awhile can be a hassle.

Anyway, here are the PRASM estimates from the carriers who provide them:

And, as always, here’s a graph of Continental’s results, as they provide a final number for the month prior:

So, for each carrier we saw an improvement from the month prior – and that’s great. Of course, Southwest’s results stand out a bit with the double-digit increase, and I think that’s mainly driven by an increase in load factor by over 9 points for the airline. During the airline’s earnings all CFO Laura Wright said that comparisons might get harder as capacity will be down less in future months than in January. But, at the same time, as we move forward, the 2009 numbers that will be used for comparisons for all cariers will be getting progressiviely worse, which can only help the numbers.

On a side note, I wonder how the cutover to Sabre affected JetBlue’s numbers. By all accounts, it went just wonderfully, but during the weekend of the transition load factors were capped at 40-60% on some flights, so that coud’ve had a bit of an effect.



There are four airlines that come out with monthly PRASM estimates at the beginning of every month, and here are the latest results. They look pretty good – the declines for Continental and US Airways were better than in the past. Southwest and JetBlue’s results were a bit worse, but both of those airlines had strong performance in October 2008.

Comparisons for this quarter will be a bit tricky, though. For example, Southwest CFO Laura Wright said during the company’s most recent earnings call:

“…last October we were actually up 14% on a unit revenue basis. November was up 1% and December was up 12%. There’s some weird things going on with the holidays, as you are probably aware. Last year Thanksgiving was very late in the month of November with a lot of the return travel in December, so when you look at November and December this year, I think the December comp will be more difficult just because of the holiday mismatch….So I think December is going to be a more difficult comparison and certainly October is a tougher one because of the great results we had a year ago.”

I’d still expect, though that we’ll continue to see better numbers in the coming months as things improve (hopefully) and as more comparisons are made off the crummy numbers of a year ago.

Well, it’s the beginning of the month, so that means August traffic results! A few airlines give revenue estimates, and on a PRASM basis, things are basically flat, or improving slightly:

It should all of these numbers of estimates provided by the carriers, except the June and July numbers for Continental, as it provides final numbers the month after the estimate.

But does PRASM (passenger revenue per available seat mile) really give us an indication of improving revenues? Yes and no, as while PRASM can certainly go up when revenues increase, it can also go up as load factor increases, as one way to calculate PRASM is multiplying yield by load factor.

(Click to enlarge)

I think that it’s safe to say here that adjustments in capacity helped boost PRASM so that it’s decrease was less than that in yield (passenger revenue per RPM). Note how that in the second quarter of this year, the decrease in RPMs was less than the decrease in ASMs, yielding a higher load factor. And there are two ways to increase load factor – increase passengers, or decrease capacity. Airlines across the industry have been increasing load factors with the latter.

So, in this case, an improvement in the decline in PRASM shows that Continental is doing a better job of handling capacity, but revenues in terms of yield still aren’t doing too hot. I think if we see an improvement in yields (and previous data shows that we could be hitting bottom), then it would be a good time to say that revenues are truly improving.

There will be more data coming soon that should shine more light on the revenue side of things. Later this month the ATA will release its monthly yield data, and in roughly a month’s time third quarter results will start coming in.