Delta to US Airways Gain as Profits Top Estimates on Fuel

Delta Air Lines Inc. and US Airways Group Inc. advanced in New York trading after reporting second-quarter earnings that exceeded analysts’ estimates, helped by declining jet-fuel prices.

Shares of Delta rose 1.7 percent to $20.80 at the close while US Airways added 2.5 percent to $18.50. The Bloomberg U.S. Airlines Index advanced 0.6 percent.

Delta and US Airways, the first of the major U.S. carriers being followed by analysts to report second-quarter results, are benefiting from lower jet-fuel costs. Both carriers today reported higher domestic revenue on steady demand for travel.

“Because of the very high operating and financial leverage, a very small percentage change in a variable like the price of jet fuel can have a magnifying effect on earnings per share,” Michael Derchin, an analyst at CRT Capital Group LLC, said by phone from Stamford, Connecticut.

Derchin has buy ratings on both Delta and US Airways.

Delta’s profit excluding some items increased to $844 million, or 98 cents a share, the Atlanta-based company said today in a statement That topped the 95-cent average of estimates compiled by Bloomberg. US Airways’ profit of $324 million, or $1.58 a share, beat the $1.52 average of estimates.

Fuel Bill

Revenue at Delta fell less than 1 percent to $9.71 billion. The carrier’s fuel bill tumbled 21 percent to $2.6 billion in the quarter. That offset declines in some fares, such as those in Japan, where a weaker yen against the dollar reduced revenue measured in the U.S. currency.

“The improving momentum we’ve seen throughout the quarter continues into our summer bookings,” Delta President Ed Bastian said on a conference call with analysts and investors today.

Revenue for each seat flown a mile will rise by about 3 percent for July and August, while September bookings are also “encouraging,” he said.

Including one-time expenses mostly related to adjusting the value of its fuel hedges, Delta’s net income was $685 million, or 80 cents a share, compared with a loss of $168 million, or 20 cents, a year earlier.


US Airways today reaffirmed plans to complete the merger with AMR Corp.’s American Airlines during this quarter. Together they will leapfrog United Continental Holdings Inc. to become the world’s largest carrier.

Including costs related to the merger and other one-time financing costs, US Airways’ net income slid 6.3 percent to $287 million, or $1.40 a share, from $306 million, or $1.54, a year earlier.

Revenue rose 3 percent to $3.87 billion, while fuel expenses fell 3.8 percent to $872 million, the Tempe, Arizona-based carrier said today in a filing.

Bookings close to the date of flight have been stronger in recent months as businesses gain confidence in the economic recovery, President Scott Kirby said today on a conference call with analysts.

“When the headlines were bad and catastrophe was around the corner, businesses tended to pull their horns in and that lasted for a short period of time,” Kirby said. “But for businesses to be successful, they need to get out on the road and meet with clients and sell their products. And so we’ve seen that kick back in.”

Spirit Results

Spirit Airlines Inc., the low-cost carrier with the highest fees in the industry, reported a profit of $45.8 million excluding certain items, or 63 cents a share, which topped the 62-cent average of analysts’ estimates.

Revenue at the Miramar, Florida-based carrier rose 18 percent to $407.3 million, helped by “dynamic” pricing on seat assignments and rising sales on vacation packages, CEO Ben Baldanza said.

“We’re becoming smarter about the way we’re pricing the things we already sell,” Baldanza said on conference call.

Last week, American Airlines said its second-quarter profit was $357 million, excluding $124 million in reorganization costs and $13 million in other expenses that the company considers one-time.

“They have more pricing power and an ability to take on fees,” Derchin said. “It’s been a Darwinian struggle of survival of the fittest, but we ended up with the fittest, who are actually going to be pretty profitable.”

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