Delta Joins US Airways With Profit as Planes Fly Full

Delta Air Lines Inc. (DAL) and US Airways Group Inc. (LCC) posted profits that beat analysts’ estimates in the first quarter, traditionally the industry’s weakest period, as they filled more seats on planes.

Earnings excluding certain items were $85 million, or 10 cents a share, Delta said today. Analysts had estimated 6 cents, the average of 15 projections in a Bloomberg survey. US Airways’ profit of $55 million, or 31 cents a share, topped the 28-cent average estimate. The airlines led an industry rally.

Both carriers had paying passengers in more than 81 percent of their available seats, and they wrung out more revenue from each seat flown a mile, a benchmark gauge. Delta hadn’t reported a profit in the first three months of the year since 2000, Chief Financial Officer Paul Jacobson said in a memo to employees.

“It’s a rare occurrence for airlines to be profitable in the first quarter,” said Michael Derchin, a CRT Capital Group LLC analyst in Stamford, Connecticut. “It’s a sign of structural change working -- consolidation, capacity discipline.”

Delta surged 10 percent to $16.72 today in New York, the most since April 2011. US Airways rose 5 percent to $16.30. All 10 carriers in the Bloomberg U.S. Airlines Index (BUSAIRL) advanced.

Photographer: Andrew Harrer/Bloomberg

US Airways Group Inc. agreed Feb. 14 to merge with AMR Corp.’s American Airlines in an $11 billion all-stock deal, a combination that will create the world’s biggest carrier. Close

US Airways Group Inc. agreed Feb. 14 to merge with AMR Corp.’s American Airlines in an... Read More

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Photographer: Andrew Harrer/Bloomberg

US Airways Group Inc. agreed Feb. 14 to merge with AMR Corp.’s American Airlines in an $11 billion all-stock deal, a combination that will create the world’s biggest carrier.

Unit Revenue

Unit revenue, or revenue for each seat flown a mile, rose 4.1 percent at Delta and 2.4 percent at US Airways last quarter. Delta said sales increased 1 percent to $8.5 billion, while US Airways posted a 3.5 percent gain to $3.38 billion.

Delta said unit revenue will drop 2 percent to 3 percent for April because of mandatory government budget cuts and a “softening” in leisure flying that carried over from late March. Federal spending accounts for about 3 percent of revenue, and it was down about 20 percent when the cuts began, according to Delta executives.

Derchin, who rates Delta and Tempe, Arizona-based US Airways as buys, said in an interview that he expected that airlines may keep paring available seating. Delta Chief Executive Officer Richard Anderson made the same point in a conference call with analysts, saying the airline is reviewing whether to pull back after the peak summer travel season.

Weakness in the Japanese yen is hurting demand in that region and also may spur Delta to shrink capacity there, Anderson said.

US Airways

US Airways expects April unit revenue to fall 3 percent to 4 percent from a year earlier and to be unchanged to 2 percent lower in May and June, President Scott Kirby said on a conference call.

“Leisure demand is still good, and forward bookings are up year over year for May and the rest of the summer. Business demand remains volatile,” Kirby said. “As long as the sequester remains in place, we expect government demand to continue to remain depressed.”

US Airways estimates delays from air-traffic control furloughs that are part of mandated government budget cuts would cost the carrier $250 million annually. The Federal Aviation Administration estimated that 1,200 flights were delayed yesterday because of staffing shortages, and said New York and Los Angeles are among the cities hit hardest.

Merger Planning

Integration planning for US Airways’ $11 billion all-stock merger with AMR Corp. (AAMRQ)’s American Airlines is “going well,” and the deal should be final next quarter, CEO Doug Parker said in a statement. He will lead the combined carrier, which will keep American’s name and Fort Worth, Texas, headquarters.

AMR said last week it had a first-quarter profit of $8 million excluding bankruptcy costs and other one-time items. Analysts project United Continental Holdings Inc. (UAL) to be alone among the seven largest U.S. carriers to post a quarterly loss when it reports results in two days.

Including one-time charges for facilities and fleet and a gain for fuel hedges, Delta’s net income fell 94 percent to $7 million, or 1 cent a share, from $124 million, or 15 cents, a year earlier.

US Airways said its net income slid 8.3 percent to $44 million, or 26 cents a share, from $48 million, or 28 cents.

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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