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Aviation Industry Updates: December 20, 2022

By December 20, 2022December 27th, 2022Industry News

Delta Expects 2023 Earnings to Nearly Double Thanks to ‘Robust’ Travel Demand

  • The airline expects its adjusted earnings to nearly double to as much as $6 per share next year, above analysts’ estimates. It forecast a 15% to 20% jump in revenue in 2023 from this year, which is expected to bring in roughly $45.5 billion.

  • Free cash flow will likely rise from more than $2 billion next year to more than $4 billion in 2024, a sharp turnaround from 2020 when Delta posted a record loss. Delta is planning to pay down more of its debt over the next two years.
  • Delta and other airline executives in recent weeks have been upbeat about a recovery in travel demand, despite warnings from other industries about economic weakness ahead.
  • “We’ve seen our recession,” CEO Ed Bastian said in an interview. “Consumers are prioritizing their spend, where they’re making choices, and they’re prioritizing investing in themselves and experience.”
  • Delta on Wednesday raised its fourth-quarter earnings forecast to a range of $1.35 to $1.40 a share, up from its previous outlook of $1 to $1.25 per share. It expects total revenue to come in 7% to 8% higher than the fourth quarter of 2019, before the Covid pandemic.
  • The U.S. airline industry returned to profitability this year thanks to a sharp rebound in travel demand and consumers’ willingness to pay higher fares, which helped carriers more than make up for increased costs like fuel.

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Mesa Splits With American, Strikes Deal With United

KEY POINTS:

  • Mesa Air Group, parent of regional carrier Mesa Airlines, disclosed 19 December plans to end its 30-year partnership with American Airlines in favour of a new, not- finalised five-year agreement with United Airlines.
    Details remain unclear, and the deal could face pushback from pilots.
  • “As a result of ongoing unprofitable operations with American Airlines, driven primarily by higher pilot wages and block-hour utilisation penalties driven by the ongoing, industry-wide pilot shortage, Mesa initiated and has finalised a consensual wind down of its American operations,” the airline said 19 December.
  • Mesa already flies for both carriers, with 37 Bombardier CRJ900s in service with American and 60 Embraer 175s in service with United, according to Cirium data.
  • The regional carrier is still “finalising” the United deal. In March, it plans to begin transitioning to United aircraft it now flies for American, the airline says.

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American Says They Cut Their LA – Asia Flying Because Of Too Much Competition

KEY POINTS:

  • American Airlines dropped Los Angeles as its gateway to Asia. The remaining long haul flights American operates from LAX are to joint venture partner hubs – Tokyo, Sydney, and London.
  • American Airlines was losing money on it’s Los Angeles – Asia flying before the pandemic because, they believe, these markets were too competitive. And South America doesn’t work for them out of LA, either. So they’re focused on domestic flying. That makes their LA-based pilots, who don’t have the opportunities to fly widebodies, unhappy.
  • Delta is now the largest carrier at LAX, having displaced American. At an employee meeting in Dallas on December 9, a recording of which was reviewed by View From The Wing, a pilot asked ‘are there any intention to downsize Los Angeles any more than it has been?’
  • “Those gates that we have out in LA, and all the money we’re putting into it – it’s hundreds of millions of dollars..those gates are really important, we’ve got to fight like crazy to make sure we keep our footprint there. The question is what kind of flying that we do with those gates.. there is a international issue that we do face that gets really hard in LA.”

View From The Wing

Will Airline Stocks Fly High Next Year?

KEY POINTS:

  • Airline companies are not exactly flying high this year. Airline stocks including Alaska Air Group (ALK), Jet Blue Airways (JBLU), Delta Airlines (DAL), and United Airlines Holdings (UAL) have fallen sharply this year. ALK and DAL are down by more than 15% each, with JBLU dropping by more than 50% while UAL has plunged by more than 10%.
  • The sell-off in airline stocks has been sparked by a combination of factors. This includes fears of a recession as there have been concerns that rising inflation and higher interest rates could see a drop in demand when it comes to leisure or corporate travel.
  • Other factors have been capacity constraints, volatility in the prices of jet fuel, and overall high inflation. A decline in airfares is also not helping matters.
  • According to data from the Bureau of Transportation Statistics, airfares fell 3% in November after a drop of 1.1% in October. However, airline fares were still up by 36% year-over-year in November on an unadjusted basis.
  • Alaska Air Bullish on FY23
  • Jet Blue Still Feeling the Blues in Q4
  • Delta Airlines Upbeat About FY23
  • United Airlines Optimistic About Q4

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