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Airlines Shine in August

Adam Levine-Weinberg
September 11, 2013

After turning in inconsistent performances this spring, airlines have bounced back with a very strong summer travel season. In July, the five largest U.S. carriers posted strong unit revenue growth across the board. The same pattern played out in August as well.


Unit Revenue Change

Capacity Change


Up 3.0%

Up 4.2%

Delta Air Lines (NYSE: DAL)

Up 4.0%

Up 3.3%

Southwest Airlines (NYSE: LUV)

Up 4.0%

Up 1.4%

United Continental (NYSE: UAL)

Up 3.5%-4.5%

Down 1.4%

US Airways (NYSE: LCC)

Up 5.0%

Up 5.1%

Source: Airline press releases 

Unit revenues stay strong
All five top U.S. airlines reported healthy unit revenue increases within a tight range of 3%-5%, just as they did for July. Moreover, capacity growth ticked up somewhat sequentially. Once again, US Airways and its prospective merger partner AMR led the industry in capacity growth. Delta was right behind them in terms of growth.

US Airways has been the fastest growing major U.S. airline recently

By contrast, Southwest Airlines increased capacity by just 1.4%, which is much slower than its typical growth rate in recent years. Moreover, it cut departures by 4% year over year. Thus, its capacity increases were the result of having more seats per plane (on average) and operating longer flights.

One laggard
Once again, United was the only carrier to cut capacity last month. Despite reducing capacity, it remained firmly in the middle of the pack with respect to unit revenue growth. This may not seem especially worrisome: United is already the largest carrier in the world, so it can afford to shrink without compromising the competitiveness of its network.

However, the result is that United's cost structure -- already one of the highest in the airline industry -- is diverging even more from peers. Cutting capacity boosts United's unit revenue by reducing the supply of seats on certain routes to better match demand. However, it also means that United is sp