Airline Weekly Lounge

The third quarter is usually a splendid time for airline profits in Europe, and this year has been no exception. Ryanair is more than surviving its recent bout of operational difficulties, having turned in a stellar earnings report. Europe’s Big Three all improved year-over-year with IAG posting its biggest quarterly profit margin to date. Air France/KLM and Lufthansa are enjoying a slowdown in encroachment by the Gulf carriers. Icelandair and Finnair are making the most of their warm months. And Norwegian at least made money—just not enough. Air Canada continues to edge out its rival WestJet, but both were highly profitable. The same could be said for rivals Japan Airlines and All Nippon, with JAL winning that competitive and profitable race. Click here to subscribe to podcast. –Jason Cottrell Subscribe to Podcast | Listen Whenever: iTunes | Stitcher

With most of the U.S. airlines having reported third-quarter earnings, it’s now clear that rising revenues aren’t keeping up with rising costs. While every U.S. airline fell victim to this condition, some are weathering it better than others. United and American Airlines were a couple of the “others” stumbling in Q3—at least compared to Delta. Neither hurricanes in Florida nor the horror in Las Vegas helped Allegiant, but it was a 19% increase in operating costs that really hurt profits. Spirit saw $40m wiped out by hurricanes. Southwest and JetBlue both maintained margins near last year’s level, but JetBlue’s hurricane problem could be a fourth quarter story with Puerto Rico’s slow recovery. Things are good at Alaska Airlines, despite some transcontinental trouble. Lastly, Hawaiian saw year-over-year profits dip so mildly and starting from such great heights that one might think there’s no trouble in paradise. Then why did Hawaiian’s stock plummet last week?

Despite being dinged by rising costs, Delta opened the third-quarter earnings season with its customary show of strength. Revenues rose 6% on just 2% growth, and it posted a 16% operating profit margin. While things aren’t quite as good in Europe, airlines there have much to look forward to, namely the elimination—one way or another—of Monarch, Air Berlin, Czech Airlines and possibly Alitalia. Is that enough to lift other European carriers? Lufthansa seems especially confident. It’s looking to not only lose a competitor in Air Berlin but also gain planes for its Eurowings unit—and it’s placed a bid for parts of Alitalia. Meanwhile, Bombardier might have found a solution to its Boeing problem by—wait for it—partnering with Airbus. Lastly, Southwest appears to be at last headed for Hawaii. No doubt the mai tais will be nice, but can the LCC compete there?

The food scene and the tequila are great in Mexico. The airline industry? Not so much—at least at the moment. Everybody lost money in the first quarter of 2017. In the second quarter, only one airline—VivaAerobus—did merely okay. What has happened to the usually high-flying Volaris? Even Interjet has outperformed Volaris in the first half. And despite lackluster success, these airlines are growing like gangbusters. Meanwhile, American Airlines goes to great lengths to demonstrate that less seat pitch doesn’t necessarily mean less legroom. Frontier, despite outward appearances, is enjoying perhaps its best results ever. Some of the smaller Gulf carriers are surging. And, lastly, there’s trouble in Thailand.

Jet Airways didn’t give up the ghost. Instead, it rose from the hospital bed and plodded toward recovery, and today the Indian airline is the proud owner of a profit streak of nine consecutive quarters. How did Jet avoid its near-death experience? Speaking of near death, Air Berlin is watching its planes get repossessed, its pilots strike and its time run short. Meanwhile, easyJet is interlining with Norwegian, WestJet and surely others to be named later. Why is this a particularly good move? Also, why are some U.S. airlines retreating from Cuba, while others are running toward it? Lastly, United is now forecasting a severely diminished third quarter, and the reasons are many—and most are solvable.

Cathay Pacific has seen all its oxygen sucked out of the room by the hyper growth of the Chinese carriers. Is there anything to be done? Sometimes waiting is the best option. Australia has two major airlines with two very different stories to tell. While Qantas is enjoying a golden age, Virgin Australia is a tragic tale in the making. Meanwhile, Air New Zealand, taking advantage of some of the same forces lifting Qantas, had a second quarter it could be proud of despite a 21% increase in fuel costs. Air Canada and WestJet are benefiting from a strong home economy, but the aggressive growth of both airlines might be stunting profits a bit. Lastly, Allegiant is looking for profits not just in the sky, but in real estate.

After losing $300m in 2016 as a result of some horrific exposure to terrorism and political tumult, things are looking up for Turkish Airlines. In its second quarter, the airline posted a 5% operating profit margin and with that likely will turn a profit for the full calendar year. How did Turkish do it? Other airlines facing some political duress include Korean Air and Asiana. South Korea’s two major carriers are caught in a crossfire of political tension among the U.S., China and North Korea. Nonetheless, both managed to grow second-quarter profits year over year. In Europe, Lufthansa, IAG, and Air France/KLM are all enjoying what seems to be a rising tide. But none of them is enjoying it as much as Ryanair.

United is still trailing its peers, but can it catch up? That’s the question we weigh first in this episode. In the second quarter, American Airlines bested United with a 16% operating margin versus United’s 14%. One thing that went right for AA: Latin America. One thing that went wrong for United: Asia. Meanwhile, little is going wrong for Alaska Airlines, which is enjoying life in all the right markets at the right time. JetBlue’s transcontinental routes, which used to be a vulnerability, are now making a mint for the airline. JetBlue even beat mighty Spirit by a whisker. Allegiant did fine despite an eye-popping drop in its profit margin. And, lastly Southwest was again a profit leader with its very conservative approach.

The airline is on such a roll that not even a grouchy demagogue can stop Delta. The Atlanta-based carrier posted a better second quarter than it did last year, and it leaves Delta with at least a slim shot of having its best year ever. Low fuel prices were a defining factor for the industry during the quarter, and Delta took full advantage. But it saw success on the revenue side too. Not all airlines were so lucky, including Norwegian, which posted a slightly negative operating margin during a quarter it really needs to be making money—a lot of money. Things are even more dire at South African Airways, although SAA has one thing Norwegian doesn’t have: a state sponsor. And Air France pilots agreed to allow the airline to create a low-cost unit. But is that even a good idea?

Terror attacks… a blockade… Alitalia… The first half of 2017 has been interesting—even against the airline industry’s high standard in that department. In just a 30-minute episode we attempt to unpack the first half of 2017. Despite a lot of excitement, the most significant story of the year—low oil prices—is really rather mundane, but still a very big deal. For instance, it means the U.S. earnings bonanza might be more sustainable. Europe is enjoying one of its better years in recent memory. Gulf carriers are cutting capacity, which might (or might not) be the start of a seismic change in the industry. Kenya Airways is back on its feet, while South African Airways is on it back. New entrants are riding an economic resurgence in South America. Lion Air, VietJet and Air Asia are ensuring capacity remains high in the ASEAN region. And that’s all before we get to China, which continues to be the 800-pound panda in the room.