UBS Projects 5% PRASM Decline In Q2

In a report published Monday, UBS analyst Darryl Genovesi said that while the June outlook for the US Airlines sector appeared stable, a PRASM decline of about 5 percent can be expected in 2Q. "We forecast a ~5% Q2 unit revenue (PRASM) decline with domestic down 3-4% and int'l down 8-9%, all unchanged from our prior update," Genovesi said. Delta is scheduled to preannounce its Q2 results on July 2, which may reflect a June PRASM decline of about 5 percent. Bookings for travel in July/August reflect a 5-6 percent PRASM decline, which is similar to that witnessed in May/June. The September bookings could begin to "show some benefit from decelerating capacity growth," Genovesi added. In the report UBS noted, "Our earnings models continue to embed a ~5% industry-wide PRASM decline in Q3, similar to Q2. We think PRASM decline decelerates from that level in Q4 given slowing capacity growth and easing currency headwind. We are modeling a 3% industry-wide PRASM decline in Q4." Genovesi expects EPS to grow in 2016, even if PRASM holds relatively flat. "We see weaker macro and/or upward revisions to capex plans as biggest risks for the group." The analyst has Buy ratings on

and

, and named both as the "top picks."