Zacks Industry Outlook Highlights: Delta Air Lines, United Continental Holdings, Southwest Airlines and AirTran Holdings
CHICAGO, Jan. 24, 2011
CHICAGO, Jan. 24, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Airlines Industry, including: Delta Air Lines (NYSE: DAL), United Continental Holdings Inc. (NYSE: UAL), Southwest Airlines (NYSE: LUV) and AirTran Holdings (NYSE: AAI)
A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/46361/Airline+Industry+Outlook+-+Jan.+2011
We believe industry consolidation and various ancillary revenues will boost profitability and cost performance of most air carriers going forward. This is an opportune moment for companies to consolidate in order to regain their lost profits post-recession and operate more effectively.
Ancillary Revenue: A number of supplementary revenue streams helped the airline industry gain ground in 2010 after two years of drought. The airline companies are enforcing a number of fees on baggage, reservation change, pet travel, food and beverage to add to their revenue streams. These are expected to enhance revenues in 2011. The IATA projects total revenue of $598 billion for 2011, up slightly from $565 million reported in 2010.
Consolidation: Airline companies are consolidating in order to restore profits. The first consolidation in the industry was Delta Air Lines' (NYSE: DAL) successful acquisition of Northwest Airlines in 2008. The merger catapulted Delta to the position of the second largest airline in the world, generating significant cost savings for both the airlines.
In October 2010, United Airlines merged with Continental Airlines and formed a new company –– United Continental Holdings Inc. (NYSE: UAL). This is the second merger that has created the world's largest airline, overtaking Delta Air Lines.
The third merger is underway between the discount leader Southwest Airlines (NYSE: LUV) and fellow discounter AirTran Holdings (NYSE: AAI) announced in September. The acquisition of AirTran represents a unique opportunity for Southwest to expand its presence in key markets. Southwest will gain a valuable market presence in Atlanta, the busiest airport in the U.S. The transaction is expected to complete in the first half of 2011.
Technology Upgrades: Air carriers are involved in numerous technology upgrades and system automation for various activities such as airline reservation system, flight operations system, website, maintenance and in-flight entertainment systems. These upgrades enable companies to perform better, lower costs and enhance customer service.
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The $1.4 billion deal between Southwest and AirTran could be good news for some fliers.
A combined company would reach $3.5 billion in revenues and have some 15,000 employees by the end of 2007.