Airlines are facing “too much capacity” this summer, says the analyst

00:00 Speaker a

Over the years, we talked a lot about a luxurious game when it comes to airlines, as they seek to perhaps a consumer of higher income. We just talk to Brett Ryan about it with us. Can these airlines continue to rely on higher -income consumers to increase their profits in this macromatic environment?

00:28 Speaker b

Yes, so I think the answer is so, some airlines can still expect a high -end user to increase revenue. It will be a great full service: United, Delta and American. UH, I think there is a lot of competition for UH, the main economy, probably even the highest quality economy travelers. So I think there are probably too much capacity in the market for those who are the number of those travelers who are in this space. So I would believe some discounts will fill the planes. So I think that the more attention you only pay for the highest quality economy and the main economy, as airline, the harder it will be to make money this summer.

02:01 Speaker a

I am interested in Josh, and how do you decrease oil prices, that dynamic oil oil here, 61, as it is in the industry?

02:27 Speaker b

Yes, look, it helps, right? So, you know, I think we have done some math, you know, recently and see, I mean, you know, UH fuel prices are between 20 and 30% airline costs. So, you know if they decrease 10% or similar, you will save a couple of points price, right, two percent of the cost. It’s just not much. I don’t think you can cut enough prices because to get an extra curve you received from fuel to make a big impact. This will help, but certainly what we still see is an industry where 2 and 3q, based on consensus, not even my numbers, but by agreement, UH expectations will be expectations for lower EBITDA, income against interest, taxes, depreciation and rent, which is usually how we value and lower margins. So I’m not going to help.

04:24 Speaker a

It’s good that I’m not going to help enough. What do you think then moves the needle? I know that you have sent your notes in some areas where we could see airlines trying to be competitive when pricing is needed. If they reduce costs, say, internal flights, can it be slightly more affected than lower oil?

04:58 Speaker b

Well, yes, I mean that I think it will be what will encourage the earnings number, right? Internal business is the biggest business of all airlines. UH and I think the discounts they have to make inside to fill the planes because you just can’t fly, you know, 60 or 70% aircraft, you’ll never make money in this way. So you had their discounts to get into the 80s plus percent. I think the discount is something that will harm earnings. We still see that International is relatively strong for the summer season. I think you really get a fairly long booking curve for people going international. So you know, The Euro is currently working against that traveler, but they didn’t see it at the beginning of the year. So I still think that demand is quite solid throughout the Atlantic Ocean, at least for the first half of the summer, and it will be great revenue support. I think we will see if someone is starting to change their thoughts in Europe. It was a very US sales point. We’ll see if everyone starts to think when we get involved in 3q. I think you could find it. It may not be enough to create a lot of softness for Europe. So I think it is still the strength this summer, and that is exactly the part of the United, American and Delta wind.

Leave a Comment