CHICAGO, Aug. 24, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Airlines, including Delta Air Lines (NYSE: DAL), United Continental Holdings Inc. (NYSE: UAL), Southwest Airlines Co. (NYSE: LUV) and JetBlue Airways Corporation (Nasdaq: JBLU).
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A synopsis of today's Industry Outlook is presented below. The full article can be read at
http://www.zacks.com/stock/news/59559/Airline+Industry+Stock+Outlook+-+Aug.+2011
According to IATA, the Asia-Pacific region is expected to generate $2.1 billion in profits in 2011, the highest in the industry, outstripping other regions. However, profit would decline substantially from the 2010 level of $10 billion. Despite strong economic growth in India and China, the Japan disaster and high fuel prices remain the key headwinds for the region's profitability.
North American carriers are being challenged by steep fuel prices as well as old and less-fuel efficient aircraft. Regional profits will likely fall to $1.2 billion from $4.1 billion reported in 2010. Growth in Europe is also lagging due to the ongoing sovereign-debt crisis. European airlines' profits are expected to reduce to $500 million in 2011 from $1.9 billion in 2010.
Profits from the Middle Eastern air carriers are expected to plummet to $100 million from $900 million earned in the prior year, owing to political instability in some parts. Latin American carriers would benefit from increased traffic, innovation and consolidation but would end up with a likely profit of $100 million, down from $900 million last year.
Only the African air carriers will likely generate a loss of $100 million in 2011. Political unrest, particularly in Egypt and Tunisia, is the major drag to the region's profitability.
Fare Hikes & Capacity Cuts
Airline companies are raising fares and reducing capacity to control increased costs, weak demand and consequences of the massive earthquake and landslides in Japan.
The carriers have already raised their fares at least eight times this year. The increased ticket prices have so long been well adopted by travelers. So, the companies have been able to pass on higher fuel costs to its customers.
With respect to capacity cuts, second largest U.S. airline, Delta Air Lines (NYSE: DAL) announced plans to trim its capacity by 5% post Labor Day and offered worker buyouts for the first time since 2009. The largest U.S. airline United Continental Holdings Inc. (NYSE: UAL) has scrapped plans to boost capacity by 2% this year to keep it similar to 2010.
The low-cost carrier Southwest Airlines Co. (NYSE: LUV) cut its capacity growth projection in the range of 4–5% from 6% while the discount U.S. carrier JetBlue Airways Corporation (Nasdaq: JBLU) reaffirmed its capacity growth in the range of 6–8% for 2011.
According to IATA, overall capacity will expand 5.8% in 2011 compared with 4.4% in 2010. However, this capacity growth is lower than what was initially expected.
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