AirTran Airways Reports Record May Traffic

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AirTran Airways Reports Record May Traffic
Wednesday June 2, 5:00 am ET


ORLANDO, Fla.--(BUSINESS WIRE)--June 2, 2004--AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE:AAI - News), today reported its revenue passenger miles (RPMs), available seat miles (ASMs), and load factor all represent records for the month of May.
AirTran Airways' traffic, measured by revenue passenger miles (RPMs), grew by 20.8 percent, to nearly 700 million RPMs, on an increase of 20.5 percent in capacity, based on available seat miles (ASMs). May's load factor, also a record high for the month of May, reached 72.3 percent, compared to 72.1 percent in May 2003. The airline enplaned 1,109,228 passengers in the month of May, a 15 percent increase from May 2003, and a record for the month of May.

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Still puzzled over dbaker's hatred of AirTran? Well read the article above one more time, then read this one:

Headwinds Slow Continental Air

By Eric Gillin
TheStreet.com Staff Reporter
6/2/2004 10:53 AM EDT

Continental Airlines' (CAL:NYSE - commentary - research) filled fewer seats this May than it did a year earlier, prompting Wall Street to deepen its loss estimates, in the latest sign that the long-awaited industry recovery is in jeopardy.

Continental announced late Tuesday that it filled 74.7% of its seats during the month of May, down from 75.9% a year earlier. The carrier said that traffic, a sign of demand measured in revenue passenger miles, rose 11.9% year over year, but capacity, a sign of supply measured in available seat miles, rose 13.8%. In reaction, shares of the carrier fell 5 cents, or 0.4%, to $10.40.

With supply outpacing demand, fuel prices high and Continental filling fewer seats than a year ago, a key industry metric called revenue per available seat mile, or RASM, is showing weakness. The carrier said that May RASM fell between 3% and 4% from last year, reversing April's gain of 3.1% and falling just in line with most analyst expectations.

"Continental's disappointing May unit revenue comparisons suggest that Continental will underperform the industry for the 12th straight month, despite a rebound in its Asian operations," said Glenn Engel, analyst for Goldman Sachs, in a research note. "We estimate that industry [RASM] rose 4.4% in May, down from a 9.8% gain in April."

Continental's underperformance prompted analysts to drop their estimates. Engel deepened his second-quarter and fiscal 2004 loss estimates on the carrier, concluding that the carrier will make a 1-cent profit in 2005. Elsewhere, Morgan Stanley analyst William Greene dropped his estimates for 2004 and 2005, telling investors estimates at other brokerages were likely to come down in the coming months, with Continental failing to post a profit until 2006.

This is a far cry from three quarters ago, when Wall Street predicted the company would post a profit in 2004, well ahead of other network carriers. A key component of the falling estimates -- aside from sky-high fuel costs -- is the industry's lack of pricing power, as measured in yield, which is being undermined as low-cost carriers aggressively expand to new markets.

And that last sentence says it all really, dbaker has a deep fear that AirTran is undermining his beloved Continental. And I have no beef against Continental, by the way. dbaker claims to not dislike low-cost carriers per se and sites Southwest as a perfect example. Wouldn't be that dbaker and Southwest (and Continental for that matter) are all based in Tejas would it?

dbaker's motivation is quite transparent

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But what's probably even scarier to those condescending dbaker types, what's probably lurking someone in the back of their minds, what frightens them to the core is the prospect of a major industry shakeout which would turn their pampered, wasteful, elitist world on it's head. Some experts feel it's already happening, and long overdue:

Fuel Costs Force Shakeout
Tuesday June 1, 3:47 pm ET
By Salim Haji


As gasoline prices remain high, the pressure on the airline industry continues to mount. Last week, Delta (NYSE: DAL - News) was reported to have hired the New York-based law firm Davis Polk & Wardwell for advice on restructuring its business. UAL (OTC BB: UALAQ.OB - News) also noted that fuel prices were the reason for the company's inability to turn an operating profit in April.

Low-cost carriers were also hit. Frontier Airlines (Nasdaq: FRNT - News) reported fourth-quarter earnings on May 28 and cited high fuel costs for greater losses than Wall Street was expecting.

But higher fuel costs may actually end up being beneficial to the low-cost carriers like Frontier, Southwest Airlines (NYSE: LUV - News), JetBlue Airways (Nasdaq: JBLU - News), and AirTran (NYSE: AAI - News). As I have previously written, in my opinion it's just a matter of time before the low-cost carriers' superior business model dominates the industry. High fuel costs may be a powerful catalyst to speed up that process.

At a Bear Stearns conference on May 12, Frontier showed data on operating margins for the December quarter for a number of airlines. Southwest, Frontier, JetBlue, and AirTran were all more than 7%. On the other hand, traditional airlines such as Delta, United, and AMR (NYSE: AMR - News) all had significantly negative operating margins.

In addition, attempts by traditional airlines to pass the higher cost of fuel on to consumers are failing to stick. The latest attempt to increase fares, led by Continental Airlines (NYSE: CAL - News) a couple of weeks ago, was rolled back last week. Delta and Continental both commented that they were forced to roll back fare increases to "stay competitive." Last week's inability to increase fares was the third time in the last six months that a fare increase was attempted but quickly rescinded.

While higher fuel prices may be putting pressure on all airlines, on a relative basis, it is the weaker, traditional airlines with uncompetitive cost structures that are feeling more pain. In the long run, higher fuel costs may prove to be a great boost to overall industry profitability by accelerating the demise of the traditional airlines that have been able to hang on for longer than many had expected. Sustained higher fuel costs may force the much-needed industry shakeout to finally occur.

If you didn't get dbaker before, I'd imagine it's become painfully obvious now what makes him tick

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And it's not just the financial analysts and business journalists who foresee stormy skies for the ineficient business model of the legacy carriers. Congressmen and Airline execs clearly see what's coming down the pipe:

Fend for yourself, lawmaker tells airlines
Amid widespread losses, key lawmaker warns on future aid
By Matt Andrejczak, CBS.MarketWatch.com
Last Update: 3:55 PM ET June 3, 2004




WASHINGTON (CBS.MW) - U.S. airline executives were warned Thursday that Congress would not come again to the aid of the beleaguered industry like it did after the 9/11 terror attacks.

Rep. John Mica, chairman of the House aviation subcommittee, said in a hearing with the heads of the major American carriers that the industry should be able to fend for itself.

"The airlines now in trouble must be prepared to fend for themselves," Mica said. "While Congress may assist the airlines with mandated security costs and war risk insurance, let me make it clear that Congress is not going to underwrite losing airline operations."

Airlines executives agreed that the marketplace should pick the winners and losers, not the government....

dbaker is already well-aware who the losers will be, and that my friends is why he despises AirTran