United Loss Beats Estimates on Fares; Southwest Posts Profit
United Continental Posts Smaller Loss Than Estimated
Kim White/Bloomberg
United Continental Holdings Inc. and other carriers have raised ticket prices to mitigate a 41 percent jump in jet-fuel prices compared with the year-earlier quarter.
United Continental Holdings Inc. and other carriers have raised ticket prices to mitigate a 41 percent jump in jet-fuel prices compared with the year-earlier quarter. Photographer: Kim White/Bloomberg
United Continental Holdings Inc. (UAL) posted a smaller loss than analysts estimated, buoyed by higher fares, while Southwest Airlines Co. (LUV)’s earnings may make it the only large U.S. carrier with a first-quarter profit.
The loss reported today by United, the world’s biggest airline, was $136 million excluding some items, or 41 cents a share, compared with the 49-cent average projection of 14 analysts surveyed by Bloomberg. Southwest said adjusted profit was $20 million, or 3 cents a share, matching the estimates.
The airlines countered a 41 percent surge in jet-fuel prices from a year earlier with six industrywide fare increases. Previous capacity cuts during the 2008 recession and steady demand for travel are also filling seats at near-record levels, improving efficiency.
‘There’s an improving economy,” Jim Compton, chief revenue officer at Chicago-based United, told analysts and investors on a conference call. “The demand picture is an improving demand picture versus declining in 2008. There is better corporate revenue.” Yields on corporate tickets rose more than 17 percent in the quarter, he said.
United, formed by the October combination of UAL Corp. and Continental Airlines Inc., said its adjusted loss excluded $77 million of costs, chiefly for merger integration.
Including those items, United posted a net loss of $213 million, or 65 cents a share. Revenue increased 11 percent to $8.2 billion on higher fares, the company said.
“United and Continental are much better positioned to manage through the current high-cost fuel environment as a combined carrier than either would have been as stand-alone carriers,” Jeff Smisek, the Chicago-based company’s chief executive officer, said in a statement.
Southwest
Southwest, the fourth-largest U.S. carrier, managed a first-quarter profit by participating in what Chief Executive Officer Gary Kelly called an unprecedented number of fare increases.
Southwest is the only airline among the five largest in the U.S. that will be profitable in the quarter, according to analysts’ estimates. Delta Air Lines Inc. (DAL) and US Airways Group Inc. (LCC) report results on April 26, and AMR Corp. (AMR)’s American Airlines yesterday posted an adjusted loss of $405 million.
Six fare increases of as much as $10 round trip each were successful in the quarter because all carriers matched them, according to FareCompare.com, a ticket-price research firm.
Southwest’s revenue rose 18 percent to $3.1 billion. That helped overcome a fuel bill of $1.04 billion, the first time the carrier has paid more than $1 billion in a single quarter, Kelly said today in an interview.
The Dallas-based carrier expects its fuel bill for all of 2011 to climb more than $1.5 billion from 2010, he said.
‘Pretty Cautious’
That increase “can’t be ignored,” Kelly said. “We’re thinking that in 2012, we need to be pretty cautious” about capacity growth.
Demand remains strong among both business and leisure travelers, Kelly said. Southwest boosted fares again April 19, for the seventh increase this year.
Southwest said it expects to complete its acquisition of AirTran Holdings Inc. (AAI) on May 2, once regulators approve the deal. The purchase will give Southwest a hub in Atlanta, which is the world’s busiest airport and is dominated by Delta. Southwest, which now flies only Boeing Co. 737s, also will take on a second aircraft type with AirTran’s smaller Boeing 717s.
JetBlue, Alaska
JetBlue Airways Corp. (JBLU) posted net income of $3 million, or 1 cent a share. That fell short of the 3-cent average on that basis of five analysts’ estimates compiled by Bloomberg. Sales rose 16 percent to $1.01 billion, the New York-based airline said today.
JetBlue trimmed its plan for 2011 capacity growth by 1 percentage point to between 6 percent and 8 percent, Chief Executive Officer Dave Barger said. The airline also opted out of deliveries of two Embraer SA E190 aircraft that had been set for 2013.
Alaska Air Group Inc. (ALK) reported profit excluding some items of $29.5 million, or 80 cents a share. That exceeded the 70-cent estimate of 13 analysts’ estimates. The Seattle-based company’s revenue rose 16 percent to $965.2 million.
Virgin America
Virgin America Inc., the low-fare carrier partly owned by U.K. billionaire Richard Branson, reported that its fourth- quarter net loss widened to $25.1 million from $18.8 million a year earlier, mostly because of fuel expenses and higher aircraft rents, wages and landing fees as it adds flights to new cities such as Orlando, Florida, and Dallas.
Virgin America was able to recover about 75 percent of fuel costs through higher fares in the fourth quarter, and ticket- price increases in the first quarter were “at the point where we’re starting to destroy leisure demand,” Chief Executive Officer David Cush said in a telephone interview.
The closely held airline, based in Burlingame, California, gets about two-thirds of its revenue from leisure travelers and the rest from business passengers.
“We’re seeing a lot of shopping, people planning a little in advance so they don’t have to pay close-in fares,” Cush said. “This is a one-story industry right now, and it’s all about fuel.”
United fell 19 cents to $20.84 at 4:15 p.m. in New York Stock Exchange composite trading, and the shares have declined 13 percent this year. Southwest slid 32 cents to $11.31 and has dropped 13 percent.
JetBlue fell 11 cents to $5.39, and Alaska Air slid 26 cents to $60.58.
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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