Aviation Industry Updates: August 8, 2023

Spirit Reports $2.3 Million Net Loss For The 2nd Quarter Of 2023

KEY POINTS:

• Spirit Airlines has reported a less-than-ideal set of results in Q2 following even poorer figures at the end of Q1. The airline has cited numerous external factors contributing to the margins. However, in a report, stakeholders and customers are assured of a rebound. Domestic travel is expected to pick up again in the coming seasons following heightened international demand over the summer months.
• The company's share price fell 7.14% upon the announcement of Q2 figures. However, ​​​​Spirit's overall outlook is positive. Total operating revenues amassed $1.4bn, which is up 4.8% in comparison to the same period in 2022. The overall load factor was 83% and given adverse weather, a DOT on-time performance of 64.4% resulted.
• The airline took delivery of five brand-new Airbus A320neo and its first A321neo aircraft during this period alone. With 198 aircraft in the fleet, one can see a 10pc increase on inventory since Q222.
• Some of the more significant outgoings were funding a new HQ in Florida, buying and maintaining spare engines, and varying crew wages.

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Allegiant Reports Its Highest Quarterly Operating Revenue Ever

KEY POINTS:

• Thanks to the robust leisure demand environment, ultra-low-cost carrier Allegiant Air recently posted a stunning profit of $88.5 million for the second quarter of this year. Following this tremendous quarter, the budget carrier remains optimistic for further improvements as network expansions are steadily underway through the remainder of this year to ensure its capacities offered meets the demand.
• Allegiant Air's operating profits for the second quarter shot up by 411.1% to $133.4 million from last year's second quarter profits of $26.1 million, and revenues substantially increased to $683.8 million. Besides being a significant 8.6% increase from the $629.8 million recorded in last year's second quarter, this was also the highest quarterly in the low-cost carrier's entire history.
• Despite the high fuel prices, the airline's expenditures - including fuel and operating expenses were down to 550.4 million, an 8.8% improvement from last year's $603.7 million.

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BofA Dumps Its Recession Call. Why Economists Are Getting More Upbeat

KEY POINTS:

• Economists at Bank of America became the first group at a major bank to back away from a forecast that a recession is on the way. Others may follow, possibly swiftly.
• BofA ‘s (ticker: BAC) Michael Gapen and his team said in a research note on Wednesday that given recent economic data, they now anticipate a “soft landing” for the economy rather than the recession they had expected to hit in the first half of next year. That is another way of saying they expect economic growth to slow down, rather than going into reverse.
• The turnaround follows news last week that the staff of the Federal Reserve is no longer forecasting a recession.
• There is a case for optimism. Even though the Fed has raised interest rates by 5.25 percentage points since March 2022 as it battles inflation, gross domestic product rose 2.4% on an annual basis in the second quarter, defying expectations. Inflation has fallen from 9% in June last year to 3% more recently, raising hope that the central bank could soon be finished with its effort to rein in price growth by reducing demand for goods and services.
• Jobs growth is healthy. The unemployment rate—at 3.6%—remains at near record lows, and economists expect that it won’t budge when data for July comes out Friday.
• BofA now expects GDP to grow 2% annually this year, up from the 1.5% predicted earlier.

Market Watch

American Mulls Narrowbody Aircraft Order

KEY POINTS:

• American Airlines (AA, Dallas/Fort Worth) is talking to Airbus and Boeing concerning a new narrowbody aircraft order of up to 200 planes, according to Bloomberg. The talks have reportedly been underway for several months and remain ongoing. Under consideration are the B737 MAX and A321-200neo types.
• “We are talking to Boeing and Airbus about our narrowbody aircraft needs for the latter half of this decade and beyond,” reads a statement issued by American Airlines on the matter. "We continually evaluate our fleet and our future aircraft requirements."
• An order for 200 aircraft would be at the upper end of the scale. Depending on determined needs, the order, if it proceeds, will likely figure between 100 and 200 aircraft and replace the older narrowbody jets in American's fleet. According to ch-aviation fleets advanced data, the airline's oldest narrowbody sub-fleets include 133 A319-100s with an average age of 19.4 years; forty-eight A320-200s with an average age of 22.4 years; and 303 B737-800s with an average age of 13.7 years.
• Notably, American Airlines expects 148 narrowbodies, primarily B737-8s, to be delivered by the end of 2027. These planes are the last of the carrier's then record-breaking 460-strong order placed with Boeing in 2011.
• In a July earnings call, American's CEO Robert Isom confirmed a narrowbody aircraft order was on the radar but stressed there was no pressing urgency, given the outstanding B737-8s. "At some point, I wouldn't be surprised if we make a commitment to some narrowbody aircraft as we get past 2027," he said, while also noting that aircraft capex is expected to average around USD3.5 billion over the remainder of this decade.
• The latest Airbus order data indicates a backlog of 4,092 undelivered A321neo, while Boeing's backlog of undelivered B737 MAX stands at 4,359. When questioned about the backlogs and other airlines placing large orders, Isom said he anticipates "appropriate regard" from both manufacturers regarding delivery timelines.

CH Aviation

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2023 HIRING EVENTS

OBAP | AUG 9-11 | MSY *onsite interviews & CJOs*

LPA | SEP 14-16 | ISM

RTAG | OCT 7-8 | FTW