We used the Amenity Viewer to set the stage for Delta's earnings call. Two key themes dominated the 2Q earnings calls for Delta and the industry as a whole:
While fuel costs may have been a dominant theme across all airlines, their strategy and ability to offset those costs vary. This is likely tor remain a key focus for analysts and may be a driver of relative performance among the airlines in 3Q. Let's explore this in more detail with Viewer.
Please note: This in no way represents investment advice. All transcript text provided by S&P Global Market Intelligence.
Delta scored near the top of airlines on an absolute basis with an Amenity Score of 55 (scale -100 to +100).
Amenity Scores across the Airlines in 2Q were either flat or declining vs 1Q:
When we drill down into the Company View on Delta, the details yield the following:
With the Company View serving as a backdrop we use Viewer to dive into the transcript itself.
Using the Key Drivers on the left to dive into Cost-Price, we quickly see a clustering of negative highlights related to higher fuel costs. When we see the highlights in the context of the document, it takes us to a paragraph that highlights some clear trends: higher fuel costs are weighing on earnings, despite a strong and improving revenue outlook.
"We are raising our full year revenue guide to 7% to 8%, reflecting strong demand, pricing momentum and record unit revenue premiums."
"Unit cost growth rates are down sequentially for the third consecutive quarter."
"Pricing is certainly a function of cost. And with higher fuel prices, you're going to expect to see ticket prices go up as well. Our pricing currently is up about 4% on a year-over-year basis, so I think it's at a good level."
We analyzed these same Cost-Price dynamics in the other Airlines earnings calls. Pricing was mentioned sparingly, with more airlines leaning on operating cost reductions. Note that the two companies most vocal on price (Delta and United Continental) scored near the top of the group overall. Perhaps the strong flexing their muscles? Separately, Southwest lives up to its reputation for more aggressive fuel hedging programs.
"Higher fuel prices that we expect will be more than offset by improved revenue and continued cost discipline"
"Strong performance from our revenue management team and Gemini, our new yield revenue management system, combined with an improving pricing environment, allowed us to drive higher domestic PRASM even in tough industry conditions."
"We're taking aggressive actions in the immediate term, including lowering our 2018 capacity growth, reducing our non fuel expenses and deferring future aircraft deliveries and CapEx."
"With hedging losses well behind us, and a strong hedge in place for this year as well as next, we are well positioned to manage through fuel price headwinds."
"The right thing for us to do is make these adjustments, including the capacity cuts in the fourth quarter."
"It's clear that we have higher cost and we need to be focused on taking actions that help us recover these higher costs."
"Better operational performance was a large driver of this improvement and resulted in lower passenger re-accommodation expense and lower crew disruption expense per ASM as well as improved labor productivity and efficiency, which helped to partially offset the impact of higher wage rates."
"We're seeing sequential improvement in non fuel unit costs as expected."
In the Key Driver dropdown on the left, we see another cluster; bullish demand commentary, both leisure and business:
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Transcript text provided by S&P Global Market Intelligence. Copyright ©2018. All rights reserved.
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