UAL, US Airways Losses Narrow on Rising Traffic, Fares

United Airlines parent UAL Corp. and US Airways Group Inc., which ended merger talks last week, posted first-quarter losses narrower than analysts estimated as more people flew on international routes and paid higher fares.

The net loss at Chicago-based UAL shrank to $82 million from $382 million a year earlier. US Airways, based in Tempe, Arizona, today reported a net loss of $45 million, compared with $103 million.

They were helped by the return of business travelers, who generally pay higher fares, as the recession eased. A rise in average ticket prices helped overcome a 50 percent jump from a year earlier in the average spot-market price for jet fuel.

“The economy is recovering and traffic demand has clearly been picking up,” David Swierenga, president of consulting firm AeroEcon in Round Rock, Texas, said in an interview. “It’s not a rip-roaring kind of recovery for the airlines, but it’s definitely under way.”

The loss at UAL excluding gains from fuel purchase contracts and accounting costs was 55 cents a share, compared with the 62-cent average of 8 analysts’ forecasts compiled by Bloomberg. US Airways reported a per-share loss of 55 cents excluding what it considers one-time items, narrower than the 71-cent average of 7 estimates.

Photographer: Aaron M. Sprecher/Bloomberg

A United Airlines plane takes off from George Bush Intercontinental Airport in Houston, Texas, on Jan. 21, 2010. Close

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Photographer: Aaron M. Sprecher/Bloomberg

A United Airlines plane takes off from George Bush Intercontinental Airport in Houston, Texas, on Jan. 21, 2010.

UAL fell $1.85, or 8.3 percent, to $20.51 at 4 p.m. New York time in Nasdaq Stock Market trading, the most since October, as broader U.S. markets declined. US Airways dropped 15 cents, or 2.3 percent, to $6.33 in New York Stock Exchange composite trading.

They joined Alaska Air Group Inc. among airlines in reporting better quarterly results than analysts’ estimates.

UAL

UAL’s net loss was 49 cents a share, compared with $2.64 a year earlier. Revenue rose 15 percent to $4.24 billion, the company said today in a statement.

The results reflected UAL’s performance before it began talks this month on a tie-up with Continental Airlines Inc. that would create the world’s largest airline. United raised ticket prices, collected more fees and benefited from previous cost reductions such as parking jets and cutting jobs.

“It was good to see United come in above estimates on passenger revenue,” said Hunter Keay, a Stifel Nicolaus & Co. analyst in Baltimore who recommends buying UAL shares. “They are serving markets that are performing well, like Heathrow and China, and are getting aggressive on pricing.”

United benefited more than US Airways because it has a broader international network, said Bill Warlick, a Chicago- based analyst at Fitch Ratings.

“The story is continuing momentum on the air-travel demand and revenue front,” he said.

Traffic, Fare Gains

Passenger traffic rose 0.1 percent, suggesting that demand began to strengthen after a 15 percent plunge a year earlier.

Yield, or average fare per mile, climbed 12 percent in United’s main jet operations. Revenue for each seat flown a mile, a measure of demand and ticket prices, jumped 19 percent while costs on the same basis rose 8.3 percent.

United, the third-largest U.S. airline, began exchanging financial data last week with Houston-based Continental, and the companies have agreed in principle on an all-stock deal with no premium, people familiar with the matter said on April 18.

Together they would leapfrog Delta Air Lines Inc. for the top spot in global passenger traffic. United and Continental haven’t confirmed that they’re in negotiations.

‘Considering Our Options’

UAL Chief Executive Officer Glenn Tilton today reiterated his view that the industry needs more consolidation, and said on a conference call that the company is “thoughtfully considering our options in that regard,” without elaborating.

US Airways halted separate merger talks with United on April 22, saying it would stay a stand-alone company. The carrier concluded that United favored a Continental tie-up, people familiar with the matter have said.

Doug Parker, US Airways’ CEO, said his carrier still may take part in industry consolidation, while declining to speculate on a potential partner.

“We don’t believe the door will be closed on future consolidation involving US Airways,” Parker told analysts and investors on a conference call.

US Airways

US Airways, the smallest of the U.S. full-fare carriers, said its net loss narrowed to 28 cents a share from 90 cents a year earlier. Sales rose 7.9 percent to $2.65 billion.

“The company’s long-term outlook remains challenging,” said Douglas Runte, managing director at Piper Jaffray & Co. in New York. “But stronger growth in fares at both mainline and regional operations helped buttress first-quarter results.”

Parker said US Airways expects “a profitable second quarter” and that revenue momentum and cost discipline will continue.

The airline’s traffic in miles flown by paying passengers rose 12 percent on routes across the Atlantic and 9.3 percent to Latin America, the carrier has said. Total traffic slipped 1.9 percent from a year earlier.

US Airways’ booked corporate revenue rose 35 percent in the quarter from a year earlier and 45 percent in April, President Scott Kirby said. Those increases are from low numbers in 2009 and remain below 2008 levels, he said.

Yield increased 7.5 percent. Unit revenue rose 8 percent as costs on that basis climbed 9.8 percent. Those expenses were up 0.7 percent excluding gains from selling auction-rate securities investments and costs to ground some planes.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

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