7/25/2023 0 Comments Blackwake pre alpha![]() ![]() And the last year was rather hard for airlines, both because of record oil prices as well as crack spreads, which reached all-time highs. ![]() Oil has always been the most significant cost element for the air transportation industry. Invest Heroes Crack spreads have fallen sharply, normalizing to pre-COVID numbers With the faster retirement of A320s, the delay of some Boeing deliveries, and the enhanced aircraft utilization, we are lowering the forecast for capacity in all of 2023 from 66 923 mln available seat miles (+10.1% y/y) to 66 754 mln (+9.8% y/y) and from 75 752 mln (+13.2% y/y) to 73 982 mln (+10.8% y/y) for 2024. The plan is to increase the aircraft fleet to 322 units (+11 units) in 2023 and to 347 units (+25 units) in 2024. The company continues to hire new staff, enabling a more efficient use of aircraft.Īlaska has also made some adjustments to the delivery schedule of The Boeing Company ( BA) planes, moving back some Boeing 737-8 deliveries from 2024 to 2025. Even as the company returned to Airbus its last A319/A320 planes in 1Q, and the number of planes in its fleet dropped from 311 to 294, Alaska has significantly boosted its aircraft utilization. As a result, we are lowering the forecast for the average Passenger Yield from ₵17.73 (+2.8% y/y) to ₵17.17 (-0.5% y/y) for 2023 and from ₵17.36 (-2.1% y/y) to ₵17.24 (+0.4% y/y) for 2024.Īlaska Airlines' operating metrics look like there's been a lot of effort behind them: The company's capacity, or available seat miles (ASM), reached 15 705 mln available seat miles (+13.9% y/y) in 1Q, topping our forecast of 15 041 mln (+9.1% y/y). In our long-term forecast of airfare prices, we have switched to using a proxy variable that reflects the ratio of the cost of jet fuel and passenger yield. IATA also notices a sharp recovery of airfares in Q2, despite falling fuel prices & inflation slowdown, so we're rather calm about nearest-term price expectations. Despite the significant slowdown in growth in 1Q, the company is positive about prices in 2Q-4Q 2023: the growth of carrier capacities continues to lag behind demand, and the recovery of the lag in West Coast business travel will become an additional prop for prices in the near future. According to the management, the total negative impact of bad weather was on the order of $13 million.Īlso, the observed decrease in the cost of oil and jet fuel enables carriers to lower prices for their customers without hurting the business margins. weather conditions during the first quarter: Storms, regular snow, and increased icing conditions throughout January and February across many parts of the country led to higher cancellation rates. The sharp deceleration of growth was mostly driven by demand seasonality and U.S. The average price of tickets sold in Q1 reached ₵15.8 per (+10.7% y/y) in terms of passenger yield, compared with the forecast of ₵17.3. ![]() New aircraft coming into operation and lower oil prices in 2023 will help to balance supply and demand, but high tariffs will remain in place. The situation in the air transportation sector remains unchanged so far: The underinvestment of the industry and the lack of capacity of carriers to meet the demand for flights, which abruptly recovered following the pandemic, help to keep ticket prices at a record high. Alaska's development going well, middle-term revenue growth is safe At the same time, crack spreads are already in a fair place, returning cost structure of airlines to its pre-COVID conditions and supporting transportation companies' margins. Travel demand remains high, while supply is still recovering, which will support near-term elevated airfare prices. We remain bullish on Alaska Air Group, Inc. ![]()
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