United Continental, US Airways Surge as Profits Top Estimates Amid Demand
United Continental, US Airways Profits Top Estimates
Simon Dawson/Bloomberg
A United Airlines tail fin is seen at Heathrow airport in London.
A United Airlines tail fin is seen at Heathrow airport in London. Photographer: Simon Dawson/Bloomberg
Jan. 13 (Bloomberg) -- Hunter Keay, an airline analyst at Stifel Nicolaus & Co., discusses the airline industry and the outlook for ticket prices. Keay speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
United Continental Holdings Inc. and US Airways Group Inc. surged the most since October after posting profits that beat analysts’ estimates as airlines regained the power to raise fares after the recession.
Quarterly profit excluding one-time items at United Continental was $160 million, or 44 cents a share, following the October merger of United and Continental airlines to form the world’s largest carrier. US Airways, No. 5 in the U.S., reported net income today of $28 million, or 17 cents.
A rebound in travel demand is allowing airlines to boost prices while benefiting from capacity cuts that have helped leave planes at their fullest in more than 60 years. Higher fares also temper the fallout from rising prices for fuel, which is one of the industry’s biggest costs.
“Fourth-quarter revenue and demand commentary and the outlook going forward look very strong,” Hunter Keay, a Baltimore-based analyst with Stifel Nicolaus & Co., said in an interview. “If we get a pullback in energy prices, there’s going to be a disparate upside for airlines going forward.”
United Continental jumped $1.70, or 7.1 percent, to $25.79 at 4 p.m. in New York Stock Exchange composite trading, for the biggest advance since Oct. 20. US Airways climbed 67 cents, or 6.6 percent, to $10.80, the most since Oct. 25.
The shares led a 2.8 percent gain for the 12-carrier Bloomberg U.S. Airlines Index, the most since Nov. 24.
Merger Results
Today’s results offered the first look at the combined operations of Chicago-based United Continental for a quarter in which traffic rose 4 percent and passenger revenue for each seat flown a mile jumped 11.5 percent.
The profit excluded $485 million of special items, chiefly for merger-related costs, United Continental said. With those items, the airline posted a net loss of $325 million, or $1.01 a share. Had the two carriers been combined a year earlier, the loss then would have been $266 million, or 85 cents a share, the company said.
The adjusted profit exceeded the 24-cent average estimate of 14 analysts surveyed by Bloomberg. Revenue of $8.43 billion also topped analysts’ projections.
US Airways posted a 6.6 percent increase in revenue for each seat flown a mile, an industry benchmark, and sales increased 11 percent to $2.91 billion, matching estimates.
Net income at the Tempe, Arizona-based airline beat analysts’ projections for 6 cents a share. US Airways reported a $79 million net loss, or 49 cents, a year earlier.
Four Profits
All five of the largest carriers except AMR Corp.’s American Airlines reported profits as they faced a 19 percent increase in the average quarterly price of jet fuel for immediate delivery in New York Harbor, to $2.38 a gallon. Fuel ended the year at $2.57 compared with $1.51 at the end of 2008, when the recession ravaged business travel.
For 2011, seating capacity will increase 1 percent to 2 percent, United Continental said, chiefly on the international flights that are typically more profitable than domestic routes.
US Airways previously forecast a 2 percent increase. Most U.S. airlines plan to keep capacity little changed this year.
United parent UAL Corp. combined with Continental Airlines Inc. in October in an all-stock deal valued at $3.47 billion, surpassing Delta Air Lines Inc. to become the world’s biggest carrier.
To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.
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