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Continental Loss Widens on Fuel; Southwest Has Profit

Continental Airlines Inc., the focus of merger talks with UAL Corp.’s United Airlines, reported a wider first-quarter loss than analysts projected as low-fare carrier Southwest Airlines Co. posted a profit.

Continental, the fourth-biggest U.S. carrier, had a loss excluding one-time costs of $136 million, or 98 cents a share, more than the average 86-cent loss from eight analyst estimates compiled by Bloomberg. Southwest’s profit of 3 cents, excluding one-time costs, matched estimates.

Higher jet-fuel prices raised total operating costs at each carrier, and an easing of the recession prompted businesses to resume travel. Continental’s revenue from each seat flown a mile, an indicator of demand and fares, rose 5.4 percent from a year earlier, while Southwest’s jumped a record 19.3 percent.

“Carriers have clearly been able to boost prices and traffic is recovering,” said David Swierenga, president of consulting firm AeroEcon in Round Rock, Texas. “Maybe it’s happening a bit slower than some people expected.”

Continental is in merger talks with United, according to people briefed on the issue. A combination of the carriers, who have declined to confirm the discussions, would create the world’s largest airline based on passenger traffic. US Airways Group Inc. said today it ended its own talks with United.

Continental fell 3 cents to $21.43 at 4:01 p.m. in New York Stock Exchange composite trading. Southwest declined 14 cents to $13.44.

AMR Corp.’s American Airlines posted a first-quarter loss wider than analyst forecasts yesterday, while Delta Air Lines Inc., the world’s biggest carrier, reported on April 20 a narrower loss that matched projections.

Continental Loss

Continental’s net loss of $146 million expanded from $136 million a year earlier, the Houston-based carrier said today in a statement. On a per-share basis, the loss was $1.05 compared with $1.10 in the 2009 period, based on a larger number of shares outstanding. Sales rose 7 percent to $3.17 billion.

Continental paid $854 million for jet fuel, its largest expense, as the price per gallon climbed.

“Revenue was $3 million light and expenses were $3 million higher than we were expecting,” Hunter Keay, a Stifel, Nicolaus & Co. analyst, said today in a note to investors.

Storms shut the airline’s hub in Newark, New Jersey, and cut sales by $25 million. Excluding $10 million in costs for worker severance payments and aircraft-related charges, the loss was $136 million, or 98 cents a share. Passenger traffic rose 5.9 percent.

Southwest Traffic Rises

Southwest’s net income of $11 million, or 1 cent a share, compared with a net loss of $91 million, or 12 cents, a year earlier. Sales rose 12 percent to $2.63 billion.

Southwest has banked on not charging to check bags and on keeping fares generally below those of competitors to attract passengers, and traffic rose 1.6 percent. Among the six biggest airlines in the U.S., only Southwest was projected by analysts to post a quarterly profit.

“This is the kind of economic environment where people are really watching their spending,” Chief Executive Officer Gary Kelly said in an interview. “Our revenues are rising faster than anyone else, our costs are lower than virtually anybody else, and the result is a very solid margin.”

Southwest would be open to buying airport gates, landing slots and other assets that might be shed by rivals that merge, Kelly said. The Dallas-based carrier has been seeking a way to increase flights from New York’s LaGuardia and beginning service at Washington’s Reagan National Airport.

Alaska Profit

Alaska Air Group Inc., the parent of Alaska Airlines and Horizon Air, had a profit excluding items of $13.1 million, or 36 cents a share. The result was 1 cent better than the average 35-cent forecast in nine estimates compiled by Bloomberg. Alaska Air rose 90 cents, or 2.2 percent, to $42.01.

Net income of $5.3 million, or 15 cents a share, compared with a loss of $19.2 million, or 53 cents, a year earlier, the Seattle-based carrier said. Sales increased 12 percent to $829.9 million.

“Our results were driven by higher load factors, improving pricing trends and good cost management,” CEO Bill Ayer said in a statement. “Selective schedule reductions, coupled with entry into new markets, also contributed to our strong performance.”

Passenger traffic rose 7 percent, while revenue for each seat flown a mile increased 11 percent.

Download: Earnings

Download: Earnings

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