AviationWeek.com/awst AVIATION WEEK & SPACE TECHNOLOGY/NOVEMBER 3/10, 2014 39U
.S. airlines may be fl ying high, but they are
not about to get carried away.
The nine largest publicly traded U.S. carriers made money
in the quarter ended Sept. 30, with several reporting record
or near-record earnings thanks to full cabins and lower fuel
prices. But the industry is still largely very cautious about
adding capacity to capitalize on the improved environment,
even as lower fuel prices make once marginal routes more
profi table. “We can’t count on $80 [per barrel] crude prices
going forward,” warns Southwest Airlines CEO Gary Kelly.
Delta Air Lines CEO Richard Anderson says he is more
concerned about cutting underperforming routes and adding
lucrative ones than growing capacity, which his airline plans
to increase just 1-3% in 2015, he tells analysts. Delta is realign-
ing its international network, pivoting away from Asia-Pacifi c
routes—which will see a “high-single-digit decline” in capac-
ity next year—while planning on modest growth of 3% or less
in North Atlantic capacity. The carrier also has cut capacity
to Moscow, Tel Aviv and West Africa by 20% as it moves to
align with demand.
Delta is acquiring 88 Boeing 717s that Southwest inherited
when it bought AirTran Airways and has begun using them
to replace inef cient 50-seat regional jets. Delta executives
also are moving faster than expected to stop fl ying Boeing
747s, saying they are increasingly unprofi table. The last 747
is expected to leave the fl eet by 2017. New Airbus A330s will
start arriving next year, and Delta is eyeing an even bigger
widebody order. “We’re still working diligently on evaluating
both the Airbus and Boeing option,” Anderson says. “It’s go-
ing to be a very interesting process because the most impor-
tant thing for us is not operating costs, it’s ownership costs.”
Southwest, which saw its third-quarter net income shoot
up 62% from a year earlier, has received a lot of attention forBrian Sumers Los Angeles, Madhu Unnikrishnan
San Francisco and Sean Broderick WashingtonTaking Off
Lower fuel prices boost
U.S. airline profi ts, but carriers
remain wary about growing capacity
AIR TRANSPORTits move into international routes. But such fl ights account
for just 1% of the airline’s capacity, and Kelly does not see
that share expanding much in the near future. “Our 2015
international growth plans are modest,” he says, adding that
the new routes are “a drag on our results right now.”
Southwest is projecting about a 5% increase in capacity in
the fi rst quarter of next year as it adds fl ights at Dallas Love
Field and Washington Ronald Reagan National Airport, and
as the 717s sold to Delta are replaced by larger Boeing 737s.
United Airlines, which has bounced back from a disap-
pointing fi rst-quarter loss and earned $1.1 billion in net in-
come for the fi rst three quarters of 2014, plans to limit capac-
ity increases in 2015 to 1.5-2.5%. The carrier is purchasing
two used 737-700s and now plans to fl y its Boeing 767s into
2020, several years longer than originally planned. United is
seeking to improve ef ciency by fl ying larger aircraft and in
some cases trimming frequencies.
American Airlines also is “upgauging” its fl eet, replac-
ing 50-seat regional jets with larger Bombardier CRJ900s
and Embraer E175s and retiring a mix of Boeing 737s, 757s,
767s and MD-88s while adding 22 new aircraft. The new mix
should add 2-3% to its capacity next year. “The airplanes
that are leaving the fleet are fuel inefficient,” CEO Doug
Parker says. “The new airplanes make a dramatic ef ect on
our product.”
American shrugged off soft demand in Latin America,
where it plans to reduce capacity, and reported a 59% in-
crease in third-quarter net income compared with the same
period a year earlier.
Among smaller network carriers, Hawaiian Airlines, Alas-
ka Airlines and JetBlue Airways are all making money. But
JetBlue says its earnings were hampered by overcapacity
in Latin America and the Caribbean. “The challenges we’ve
had out of that part of the world have not been in load factor,”
JetBlue President Robin Hayes says. “There has been a lot of
capacity and that has put close-in pressure on average fares.”
Alaska executives reported some softness in Seattle,
where Delta has increased competition by adding fl ights,
but they say the operation remains profi table.
Both U.S. publicly traded ultra-low-cost carriers, Spirit
Airlines and Allegiant Air, also reported solid earnings re-
sults, with Spirit’s pre-tax margins coming in at 19%. Spirit
also stands out in the industry for its aggressive expansion.
It plans to take delivery of 15 Airbus narrowbody jets in 2015,
expanding its fl eet of 58 aircraft by more than 25%. cWith Aaron Karp in Washington.American Airlines
posted a 59%
increase in third-
quarter net income.ERIK SIMONSEN圀漀爀氀搀䴀愀最猀⸀渀攀琀圀漀爀氀搀䴀愀最猀⸀渀攀琀
圀漀爀氀搀䴀愀最猀⸀渀攀琀