A difficult operating environment that included higher fuel costs, low fares and poor weather made the second quarter of 2004 anything but easy for North America's low-cost airlines. But several surprised investors with solid results.
AirTran posted its ninth consecutive quarter of profitability, with net income of $17 million on $275 million in passenger revenues. Amid rising expenses, especially fuel and insurance prices on its increasing fleet of newer Boeing 717s (replacing older, low-value McDonnell Douglas DC-9s), AirTran retained a reasonable control on costs. Excluding fuel, unit costs fell by 1.1%. Operating margin for the quarter was 11.3%.
Like many others, AirTran boosted capacity in pursuit of market share in the last quarter, but after a rise of 18%, management expects this to subside. No new cities are expected to be added to the schedule this year, but the airline is eyeing major expansion as it ramps up its Next Generation 737 fleet.
AirTran accepted the first of at least 50 737-700/800s it plans to acquire in June, as it lays the foundations for an aggressive growth phase planned to begin in 2005. The 737s are due to be added at the rate of one a month, and the airline has options and purchase rights for a further 50 aircraft.
JetBlue Airways retained its trademark control on costs and reported an industry-leading 14.1% operating margin for the last quarter. Notably, the carrier reported a 3.7% drop in unit costs despite a 22% increase in fuel prices.
Revenue was up 30% year on year on a 40.8% increase in traffic. What is more, traffic growth kept pace with a capacity increase of 42%. And despite a quarter fraught with turbulent weather, JetBlue reported a 99% completion factor. During the second half of the year, JetBlue says it will shift some of its off-peak transcontinental traffic to Florida. It is also trimming services from New York to Long Beach, Oakland and San Diego, California.
Meanwhile, Canadian low-cost carrier WestJet Airlines reported its 30th consecutive quarterly profit, although overall results dropped sharply. Unable to overcome a 32% spike in fuel costs and rising fees at Toronto Pearson airport, WestJet saw profits fall 50% to $5.7 million.
Nonetheless, WestJet boosted capacity to Toronto during the quarter. Overall capacity was up 29% on a 24.5% growth in traffic last quarter.
WestJet announced earlier this month plans to buy six Boeing 737-600s for delivery in 2005 and 2006.
REBECCA RAYKO / WASHINGTON DC
Source: Flight International
