Six of America’s big airlines - American, United, Delta, Continental, Northwest and US Airways - are expected to report losses of €5.5 billion in 2004. Over the Christmas holiday period, bad weather and computer glitches caused hassle for passengers. However compounding these factors was the high number of baggage handlers at the Philadelphia hub of US Airways (which is operating in bankruptacy), who called in sick. In addition, a high level of absence was reported among flight attendants. More than 300 flights were cancelled. Comair, a unit of Delta Airlines cancelled 1,100 flights because of computer problems, stranding thousands over the holiday period.
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| Cockpit of Boeing 737-700 (Southwest Airlines) |
As an infrastructure industry, the impact of a struggling airline industry has a wide impact and the shakeout is going to get more bloody in 2005. Airlines are shutting down services to many cities and the New York Times quotes Michael Allen, the chief operating officer at Back Aviation as saying that one-third of America’s 609 airports offering daily flights are served by just one airline.
In a memo on December 15th, US Airways advised flight attendants based at airports in Boston, Charlotte, New York and Washington that they would have to fly an additional five hours a month commencing in February to compensate for staffing shortages. The memo came on the same day that flight attendants reached tentative agreement on a new contract that would cut their pay 9 percent and reduce benefits, including sick and vacation time. According to the New York Times, some new airline flight attendants earn just $12,000, less than they might make at Wal-Mart or as a bank teller.
Bucking the industry trend is the US leader of low cost airlines, Southwest Airlines, which provided the template to a struggling Ryanair in the early 1990’s.
Southwest Airlines’ net income for third Quarter 2003 was $106 million, representing its 50th consecutive quarter of profitability. It is the top passenger carrier and will be the only major airline to make money in 2004, and is forecast to make a profit of $430 million in 2005. Its market capitalisation of $12 billion is five times that of any other airline.
In December, Southwest acquired the assets of the bankrupt ATA airline and acquired six of ATA's 14 gates at Chicago Midway Airport, giving it 25 of the airport's 43 gates. In addition, the airline is expanding its presence in Philadelphia.
Ryanair presented the following comparisons with Southwest at an Investor Roadshow Presentation in respect of its Half Year Results to September 30, 2004;
|
Southwest |
Ryanair |
| On-times (Aug 2004) |
77% |
94% |
| Emp. per aircraft |
74 |
35 |
| Cash as % of half-year revenue |
55% |
197% |
| Passenger numbers (Sept 2004) |
37m |
14m |
| Load factor |
74% |
87% |
| Average yield |
$91 |
$55 |
| Net Margin |
7% |
28% |
| P/E |
37 |
13 |
Click for the Ryanair Roadshow Presentation.
