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US Airways Group, Inc. Message Board

  • wgrsh wgrsh Apr 17, 2013 10:43 AM Flag

    LCC's fuel costs

    Jet fuel is now about 33 cents below LCC's early April guidance for the year. A month doesn't make a year, but on their remaining 1.1 billion gallons to use, that's a cost savings of about $367 million. A $1.78 eps cost savings for the last 3 quarters of the year. Remarkable.

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    • All coming down to demand/revenues/pricing, if holds up/stable, doesnt have to really increase, pps should rise significantly in short order. Market is clearly concerned about these issues...We shall know about demand, etc at 1q report and ccall next tuesday or even sooner if other airlines report.Demand held up very well during the Euro selloff in 2H of 2011, would think would be ok this year but sequester is the wild card..

      • 2 Replies to cavalier2015
      • The fuel savings is extremely material and, over time, should result in excellent 2013 earnings.

        The short term problem is that the Boston bombing -- and the resultant silliness at the airports (dumb evacuations when people fear suspicious packages) -- is likely to depress short term bookings. If you listen to Scott Kirby on the quarterly calls, he always says that headlines can materially affect bookings in the short term. I could be wrong, but I'd bet that Boston surpresses airline demand for a week or two. Remember, this is a game of high volume/low margins, so little psychological changes can matter.

        No need to rush into anything here at this price. We can wait until Kirby speaks next week to see how demand is holding up.

      • Actually, RASM held up pretty well in Q1, and on the top line I expect LCC to do ok (despite softer PRASM). But as you mention, softness in demand going forward is the question, which so far has been characterized as having a slight impact. Last year (a year of record profits) had softness in demand for quite awhile. I don't know how to gauge the sequester impact since there is so much wild stuff about it being thrown about. Demand usual runs with GDP changes. And besides a dime change in fuel is the same as about a 1% revenue change.

 

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