Zacks Industry Outlook Highlights: JetBlue Airways, Delta, Southwest Airlines and American Airlines Group
CHICAGO, Aug. 1, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Airlines, including JetBlue Airways Corp. (Nasdaq:JBLU-Free Report), Delta (NYSE:DAL-Free Report), Southwest Airlines Co. (NYSE:LUV-Free Report) and American Airlines Group Inc. (Nasdaq:AAL-Free Report).
Industry: Airlines
Link: http://www.zacks.com/commentary/33715/
We believe industry consolidation and various ancillary revenues will boost the profitability and cost performance of most air carriers going forward. This is a suitable time for companies to consolidate for higher profits and operational efficiency.
Additional Revenue Gains: Air carriers are increasingly focusing on passenger satisfaction and experience to drive growth. JetBlue Airways Corp. (Nasdaq:JBLU-Free Report) augmented its TrueBlue loyalty program by allowing a single customer to earn and use points as a group, while Delta (NYSE:DAL-Free Report) has upgraded its Economy Comfort seating in all transcontinental flights operating from New York's JF Kennedy Airport to Los Angeles, San Francisco and Seattle. The IATA projects total revenue of $746 billion in 2014.
Mergers & Acquisitions: Airline companies unite in order to restore lost profits and broaden their perimeter. This was evident in the past mega mergers within the industry involving Northwest Airlines and Delta Air Lines in 2008, United Airlines and Continental Airlines in 2010 and AirTran Holdings and Southwest Airlines Co. (NYSE:LUV-Free Report) in 2011. All three companies -- Delta, United and Southwest -- are long-term beneficiaries on capacity and cost fronts.
The recently merged U.S. Airways Group Inc. and AMR Corporation have gained in size and capacity by creating the largest global carrier American Airlines Group Inc. (Nasdaq:AAL-Free Report). Despite the merged entity having more pricing power and control over a larger number of slots, we believe it will have little effect on the dynamics of the U.S. aviation industry as 80% of the same market will be dominated by the new American Airlines, United Airlines, Delta and Southwest Airlines.
Expansion: North American carriers are continuously striving to increase their range of domestic and international flights. United Airlines is planning an international service between Los Angeles and Melbourne from Oct 2014. To expand operations in Latin and Central America, United Airlines plans to introduce services to Chile, Dominican Republic and Belize from Dec 2014. Some U.S. carriers are also forming joint ventures with foreign partners to offer better connectivity to their customers.
Delta Airlines is strengthening its position in Seattle by adding several domestic and international destinations from the western coastal city in addition to reinstating its Barbados operation after a gap of 3 years. Likewise, after operating for several decades within the U.S. domestic market, Southwest Airlines is finally flying into international territory, with flights to the Caribbean. The carrier recently inaugurated services from Atlanta, Baltimore and Orlando to Oranjestad, Aruba and Montego Bay, Jamaica. Route expansion coupled with affordable ticket pricing will augment passenger travel demand.
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