2 bits of financial news today:
1) The AP reports that the airline industry will lose about $1 billion in the 4th quarter. Remember all of those articles talking about the amazing recovery? Well, they were shortsighted and put too much faith in the normally strong 3rd quarter numbers. According to the article:
What he (analyst Ray Neidl) and other analysts fear is that the number of available seats will grow too fast in 2004, negating the potential benefits of the anticipated increase in passenger demand by putting downward pressure on ticket prices and profit margins, or “yields.”
In other words, the airlines themselves haven’t learned anything, dumping too much capacity into a marketplace that can’t handle the additional supply without diluting yields. Haven’t we gone through this before? Sheesh.
2) Similarly, JP Morgan analyst Jamie Baker says that JetBlue has been, and will be, adding too much capacity to their route network, especially in Boston where American has also increased their capacity significantly. In a research note Baker writes that JetBlue’s Boston entrance is “great news for Boston passengers but not JetBlue shareholders.”