Spirit, Delta, Polio and Flynonstop – one gone, one worry and two winners

Dino D'Amore
By Dino D'Amore October 29, 2013 20:18

Spirit, Delta, Polio and Flynonstop – one gone, one worry and two winners

So Spirit Airlines has its quarterly results in once again providing shareholders with more wonderful news as it announces it is going to double earnings per share. Meanwhile Delta has posted a $1.2bn ($1.41pds) profit for Q3 2013, up $444m year on year, including $157 million in special items. Even so September quarterly results included a $249m expense from the Delta employee profit share scheme.

Adjusted net debt at Delta stands at $9.9 billion.

But you may recall that we thought here that Delta needed to slow growth earlier this year, this is reflected in Delta’s figures as they show that traffic increased 2.1% on a 2.6% increase in capacity. This is very far from bad but it still shows that judging capacity needs remains a knife edge art and Delta might yet see this slight gap increase over this current quarter.

The good news though was that passenger revenue increased 6.7%, or $581m year on year, while PRASM increased 4% year on year with a 4.5% gain for yield. Cargo (what else) provided the bad news revenue down by 6.1% or $15m.

Something for Delta and others to worry about is the current breakout of Chinese airlines on the international stage as congestion at home limits growth. The rate of Chinese airline expansion has increased dramatically over the past few months with international traffic at the big three up between 18 and 23% year on year.

It is also interesting to note that transit customers are increasing dramatically with Australia and Europe targeted heavily, with another 23 new international routes scheduled to start over the next few weeks. The Chinese airlines are having a mixed time of it at the moment with Air China third-quarter net profit down 7% to 2.94bn yuan ($483m). While China Eastern third-quarter net profit rose 8.5% to 2.86bn yuan. But the real need to break out internationally comes from the central government in Beijing making it clear that it wants to see a low cost market established and is currently moving to liberalize the market – Great news for lessors and manufacturers. The central government has already been openly questioning people who book business and first class seats as not being at one with the people of China and this has taken away huge numbers of premium travelers from the Chinese airline market of late. All in all – increased competition from the Chinese carriers is highly likely across the globe as they show what Air India should have done a decade ago.

Meanwhile FlyNonstop has ceased operations today following its failure to attract new investors. The airline advised its customers to contact SAS for rebooking following a deal with the Scandinavian giant. The website states:

“We regret to announce that of today we have sent a petition for bankruptcy of FlyNonstop As, All flights from today onwards have been cancelled…We are now contacting our customers via email and SMS to provide advice and guidance on how to deal with rebooking/purchase of new tickets for their journey.”

However today we should all keep an eye on the seemingly large outbreak of polio in North East Syria. This disease is highly communicable and thus may well spread rapidly across the region, especially as the Arab spring has led to a gap in vaccination rates across North Africa. This is a matter that airlines and investors in the same should not overlook and should keep an eye on for possible impact on revenues. Lebanon, with more than 700,000 registered Syrian refugees is currently racing to vaccinate people to halt the spread. There is of course no cure for polio, it is a highly-infectious and horrific disease which invades the nervous system and can cause permanent paralysis within just hours.

From yesterday: Well that is what you get for sending an editor “metal” in the draft text – of course we mean aluminium.

Dino D'Amore
By Dino D'Amore October 29, 2013 20:18
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