U.S.Airlines:January PRASM Decline is In Line with Our Model

Adding DAL backThe A4A revenue report provides a less comprehensive picture now than it did prior toDAL's withdrawal from the organization in late 2015, but is at the same time moreimportant now than it was a few years ago as many airlines have stopped reportingmonthly revenue figures. We manually combine DAL's monthly revenue and that of theA4A carriers to obtain a more complete understanding of industry revenue trends.

    January PRASM down 1.4% for industry on y/y basisWe estimate that US airline industry (A4A+DAL) unit revenue (PRASM) for the month ofJanuary declined ~1.4% y/y with domestic and international down proportionately, allabout in line with our estimate based on U.S. travel agency ticketing.

    Down ~1.4% sequentially tooOn a seasonally-adjusted (SA) basis, we estimate that January PRASM declined ~1.4%sequentially, although still 2-3% above mid-2016 trough (Figure 1). We would expecty/y PRASM growth to accelerate in February given its easier comparison.

    See accelerating y/y PRASM trend in Q2/Q3Using trailing three-month average PRASM as an anchor, we estimate that flat SAPRASM on a prospective basis would imply ~2% y/y industry PRASM growth in CY2017 including ~flat PRASM in Q1, 3-4% growth in Q2-Q3, and then flat to modestgrowth in Q4 (Figure 2). We continue to see the biggest PRASM opportunity for DAL in2017.