The real meaning behind what airlines say on investor conference calls

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LEDE PHOTO - January 14, 2015 Hartsfield-Jackson International Airport: A Delta jet takes off on Wednesday, Jan. 14, 2015. Hartsfield-Jackson International Airport has lost one of its two titles for world's busiest airport, with Chicago O'Hare taking the title for the most flights, according to year-end data from Flight Aware. Atlanta still carries millions more passengers, but for many years it held both titles. The decline in takeoffs and landings in Atlanta came as Delta Airlines retires regional jets and replaces them with larger planes, while Southwest Airlines cut back on AirTran flights here. JOHN SPINK / JSPINK@AJC.COM

Airlines have a funny way of using complex terms to convey simple things.

That showed even in Delta Air Lines’ relatively straightforward announcement Tuesday of a $4.5 billion profit for 2015.

Airlines use tortuous terminology in part because the things investors want to hear are very different from what consumers want to hear. In fact, consumers’ motivations (low fares) are sometimes the exact opposite of investors’ interests (high profits) — and airlines know it.

The conflict comes when airlines discuss their financial results on quarterly conference calls with analysts, because the public discussion is webcast and recorded for anyone to listen. What’s more, airlines are limited in what they can say about future air fare moves because signaling future price changes could lead to accusations of collusion.

That leads to the use of some interesting terms to emphasize what airlines want to tell investors, which is: We will try to keep fares high to increase profits. But we certainly won’t say that in public in just so many words.

Here’s a handy guide to translate airline investor-speak into more familiar terms:

Increased unit revenue = Higher fares

Expand operating margins  = Increase fares

Revenue premium = Higher fares than other airlines

Push fuel savings to the bottom line = Keep fares high and avoid overspending on expansion, even when fuel prices go down

Capacity discipline = Not adding many flights

Increased load factor = Fuller planes

Upgauging through densification = Squeezing more seats onto a plane

Yield = Average fares, on a unit basis

Curtail revenue dilution = Keep fares high

To be sure, the term “Higher fares” can mean, for example, more first class fares sold. Since first class fares cost more than coach fares, that drives up the average, even if coach fares remained the same.

In fact, Delta has been seeking to sell more of its first class and comfort plus seats for cash rather than giving them away as free upgrades.

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