Photo by Lance
What’s the most efficient airline? Well, if you want to take an investor’s perspective, it won’t have anything to do with on-time records or the percentage of bags that arrive to their correct destinations, but money. And looking at the past year, Delta Air Lines comes out on top.
At the end of last month JP Morgan released their Q2 report on U.S. airlines’ earnings and performances, and Forbes crunched the numbers for Q2 and the three prior quarters to rank airlines’ efficiency (when it comes to raking in revenue) over the past year. Here’s how it turned out:
- Delta
- American
- United
- Southwest
- Alaska
- JetBlue
- Hawaiian
- Virgin America
- Allegiant
- Spirit
So, the big three U.S. airlines know how to make money, but that’s no surprise to anyone. Low-cost airlines are at the bottom of the pack, but Southwest actually trails United closely, which you can see in Forbes’ chart here.
And Southwest came out as the darling of the JP Morgan’s Q2 report, which Road Warrior Voices obtained a copy of. So if you’re looking to invest, Southwest is a good place to put your money, according to the JP Morgan analysts behind the report. In their words, “Southwest looks cheap.” The analysts also said, “This is the stuff opportunities are made of.”
The JP Morgan analysts raised the airline’s equity rating for the airline from Neutral to Overweight, meaning it’s expected to outperform. And that all happened for Southwest without charging for checked bags or change fees, which gives us hope that the airline will continue to avoid charging passengers the same ancillary fees of other carriers.
Wondering how this was all calculated? We all know airlines have plenty of ways to count their money, but the key unit of measurement for airline profitability—and it’s the one investors are interested in—is called RASM, which stands for Revenue per Available Seat Mile. RASM factors in all the ways airlines are collecting money from passengers, from ticket sales to change fees. And across the industry RASM is considered the way to measure and compare airlines’ efficiency. As it goes, the greater the RASM, the more profitable the airline (should) be.
For those who are curious, the formula is: RASM = Operating Income / Available Seat Miles (ASM).