When an airline like United adds that kind of capacity...
Big airlines seen outperforming low-cost carriers
Thursday July 1, 4:14 pm ETNEW YORK, July 1 (Reuters) - Shares of larger airlines, also known as legacy carriers, will outperform those of low-fare carriers in the second half of 2004, reversing a three-year trend in the airline industry, a Goldman Sachs analyst said on Thursday.
"The big airlines are losing less money. The smaller airlines are making less money," said Glenn Engel, airline analyst at Goldman Sachs. "They are closing the gap."
A faster-than-expected rebound in travel drove legacy carriers such as American Airlines, a unit of AMR Corp. (NYSE:AMR - News), and Continental Airlines (NYSE:CAL - News) to add capacity in the past year, after cutting back during the SARS epidemic and beginning of the Iraq war.
United Airlines (OTC BB:UALAQ.OB - News) is expected to expand its capacity by 5 to 6 percent this year, Engel said. "When an airline like United adds that kind of capacity, it's equal to creating an airline the size of Frontier," Engel said, referring to Denver-based low-cost carrier Frontier Airlines (NasdaqNM:FRNT - News).