Airline Weekly Lounge

Earnings season is in full swing and really there’s too much to talk about within the average commute or treadmill run. So we’ll talk fast. And in this episode, our fast talk starts with American Airlines’ billion-dollar quarter and, naturally, how that compares to rivals Delta and United. Speaking of which, United posted a second-quarter operating margin that was competitive with Delta and AA (although it didn’t beat them.) Could United at last be truly closing in on its peers? Meanwhile, Southwest and Alaska Airlines posted margins that made the legacy carriers look like a bunch of pikers and underscored that it’s been a golden age for U.S. airlines. Ah, but have the U.S. airlines peaked? And lastly, we revisit our recent conversation about Azul, as the airline reached out to us with some interesting and valuable info.

Delta Airlines gets a lot of play in this episode, but it’s not because we’re obsessed with Delta. Rather, there are two practical reasons: First, Delta is the the earliest of the big airlines to report. Secondly, with Delta’s global reach, you can learn a lot about the whole industry from this airline. What did we learn? Revenues continue dropping, but so did costs. Delta remains bullish on its West Coast and transatlantic markets. And, its operational performance continues to dazzle. Less dazzling was Norwegian, which posted an 8% operating margin in Q2. But 8% doesn’t inspire much confidence that the low-cost longhaul carrier will have a great year. And Qatar Airways, for the first time, reported its full-year earnings. We try to unpack the Gulf carrier’s somewhat complicated report.

Brazil’s Azul is no doubt an innovative airline. But has it become too clever by half with its low-cost longhaul venture? A couple years into the experiment, we discuss it in this episode. Meanwhile, its competitor Gol is asking for relief from its bondholders. When the economy recovers, what are the prospects for both of these airlines? Further north, a rumor has been floated that Delta is interested in buying a piece of WestJet. Etihad might be wishing it never bought into Alitalia. But everybody among U.S. carriers wants a piece of Havana, and the U.S. DOT only had so much to dole out. Malaysia Airlines has a new CEO. And we take a look ahead at the U.S. earnings reports, which will start hitting the streets this week.

Turkish Airlines and its cross-town rival Pegasus were seeing trouble in their business before the attack on Istanbul’s Ataturk International Airport. In this episode we try to assess—or at least speculate—how the attack will further hurt the two airlines’ prospects. Also, could Turkish’s business model, which relies heavily on sixth-freedom traffic, be especially vulnerable here? But this episode isn’t all glum. In fact, we discuss new routes announced by Allegiant—currently the most profitable airline on Earth as measured by operating margin—that are a pretty big departure from its business model. Will they work? And lastly, as we’ve crossed the sixth-month mark for the year, we take a look back at the half-year-in-review. In this segment, we cover a lot of ground including the Big Three Gulf carriers, Transavia, Virgin Australia, Azul and Eurowings, to name a few.

In the wake of Brexit, will the U.K. be able to remain in the European Common Aviation Area? We don’t know. But we do know that if the U.K. is relegated to some other status, it would obviously impact airlines inside and outside the U.K. In this episode we do a quick survey of airlines such as British Airways, Virgin Atlantic, Flybe, easyJet, Norwegian and Aer Lingus and attempt to size up each of their levels of exposure to Brexit fallout. Frontier Airlines had a terrific first quarter, but not as terrific as its peers—does that matter? Air Mauritius has returned to profitability, but is it sustainable in a region that’s likely to only become more competitive? In Canada, NewLeaf is looking to take flight in July, and WestJet appears to be well aware of it.

Wherever you go in the airline industry, you’re never too far from Singapore Airlines, a carrier that played a primary role in—count ‘em— four of the bigger storylines last week. Singapore is pulling out of Brazil. In India, Singapore will likely be a key beneficiary of the end of the 5/20 rule. Singapore and United oddly seem to be rumbling on a San Francisco route. And Virgin Australia is asking Singapore and other investors for more money. In non-Singaporean news, United Airlines unveiled a plan to generate $3 billion in value. The U.K. is voting on whether to leave the European Union and take its enormous aviation market along with it. We talk about whether Frontier’s day-of-week-specific flying signals a change in approach for the airline. And, lastly, is Alaska really considering keeping the Virgin America brand?

Scandinavia’s SAS posted a pretty rough quarter despite huge tailwinds from its healthy home economy and cheap fuel. Fierce competition, labor concerns and operational problems all share the blame. Is SAS’s long-haul strategy the answer? Or will it take a merger? Meanwhile in Africa, Fastjet is failing fast, posting an ugly 2015 full-year result. Clearly, it is tough to be a start-up airline on a continent rife with bureaucracy and protectionism. The turboprop carrier Flybe achieved a small annual profit, which was a big deal. Will the airline’s resurgence continue? And for U.S. carriers Delta, American, United and JetBlue, unit revenue declines haven’t stopped—there was hope they would’ve by now—and costs have stopped falling. That’s a recipe for margin pressure.

United last week revealed its new premium experience named Polaris, which includes its business class cabin. Ironically, the big design features in the cabin are all about missing the experience, because United wants its passengers to sleep right through it. But in addition to being optimized for sleep, the cabin is also optimized for something else: seat density. Does United have the right formula here? Also, how does Polaris compare to American’s and Delta’s business classes? Low oil prices are good for airlines in general, but are they good for airlines in oil markets? In this episode we do a quick survey of oil markets around the world and how their airlines are faring. Mexico’s Interjet posted a tepid profit in the first quarter. And American Airlines made a huge change to its loyalty program that was, well, yawn inducing.

Ryanair is like a runaway train, in that nothing seems to be able to stop it. Despite unfavorable hedges, terrorism, air traffic control strikes and plenty of economic weakness, the airline still managed to turn a profit during the historically weak first quarter. A 6% operating margin never looked so good. How did Ryanair’s performance compare to that of Wizz Air and easyJet—two airlines that also had solid off-peak quarters? Also, with all three of those airlines growing, when will they start stepping on each other’s toes? Outside Europe, China’s HNA Aviation is purchasing a piece of the struggling Virgin Australia. Is it a smart move? Plus we have an optimistic take on the important, even if not-so-interesting, TSA situation in the U.S.  

Why are we seeing such different results from the two big Korean airlines? Korean Air again overcame systemic challenges to deliver a standout performance in the first quarter. And although the fuel situation certainly helped, the story wasn’t only about fuel. If you don’t believe us, just ask Korean’s chief rival Asiana, who struggled mightily in the same quarter. And although there’s no sign of a joint venture happening between Korean Air and Delta, we discuss it anyway, because that’s how we are. Terrorism is—for good reason—on the minds of airlines around the world right now. It’s wreaking havoc on the balance sheet of Turkey’s Pegasus, which is losing a lot of money. But terrorism might be having the opposite effect for Thai Airways, which has made a brilliant return to profitability. We touch on SpiceJet, a comeback story in its own right. And, of course, we talk about what last week’s horrible crash means for Egyptair in the longer run.