Tags: US | Earns | Airlines

Return of Travelers Boosts Airline Profits

Friday, 22 Oct 2010 01:40 AM

 

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United Continental, Southwest, and JetBlue all reported strong third-quarter profits on Thursday as more people flew, and paid more to do it.

Because of that, airlines are restoring some of the flights they cut during the recession. The trick will be to resist adding so many flights it kills their profits. They want to meet rising demand without offering so many seats they have to resort to discounts to fill them.

United Continental Holdings Inc., for instance, said capacity will grow 3 percent to 4 percent during the fourth quarter. It said most of that will be restoring flights cut a year ago. Its capacity should grow no more than 2 percent next year.

"We will not grow for growth's sake, but only if we can maximize our profitability by doing so," President and CEO Jeff Smisek said on a conference call.

JetBlue said fourth-quarter capacity will rise as much as 10 percent as it continues to add flights in Boston and the Caribbean. Delta Air Lines Inc. said on Wednesday that fourth-quarter capacity will rise 5 percent to 7 percent, mostly on international flights, which it reduced sharply a year ago.

Still, most of the airlines saw traffic rise even faster than capacity in September suggesting they have enough business to support the additional flights. The only exception was Delta, which added capacity slightly faster than traffic rose.

Airlines have been downplaying the flights they've added, but "the reality is, we're seeing capacity increases," said Helane Becker, airline analyst at Dahlman Rose & Co.

The airlines suggested that demand is stronger than usual for fall, ordinarily a slow travel season. Ray Neidl, an analyst for Maxim Group LLC, said he thinks the industry rebound will last beyond that.

"I think this is a little more long-term," he said. Referring to 2011, he said, "Despite the lackluster economy, it's going to be a big year for airlines, especially as consolidation kicks in."

Chicago-based United Continental will have its hands full with or without adding flights. It is working to combine United and Continental airlines into what will be the world's largest airline. CEO Smisek said he hopes to have a single certificate, allowing both airlines to fly as one, from the Federal Aviation Administration by the end of next year. That's earlier than previously thought. He said he's aiming to have their work forces merged by then, too. The combined airline will be called United Airlines.

The most recent quarter was the last one for United and Continental as standalone airlines. United posted a $387 million profit, or $1.75 per share. A year earlier it lost $57 million.

Continental's profit was $354 million, or $2.16 per share, after losing $18 million a year earlier.

Revenue at United's former parent company rose 21.7 percent to $5.39 billion. Continental revenue rose 19.2 percent to $3.95 billion.

Discounters Southwest Airlines Co. and JetBlue Airways Corp. also benefited from more passengers and higher fares.

Southwest reported net income of $205 million for the quarter and said traffic rose 5 percent. The higher traffic and average fares pushed revenue up 20 percent to $3.19 billion.

An adjusted profit of 26 cents per share was a penny better than expected by analysts surveyed by Thomson Reuters.

CEO Gary Kelly said the outlook for October is excellent. He predicted revenue per passenger will rise in the fourth quarter even though that's usually a slow period for travel, other than the December holidays.

JetBlue earned $59 million, or 18 cents per share, for the quarter. That was more than what it earned all of last year.

Revenue rose 21 percent to $1.03 billion, which is what analysts expected, although its per-share profit was a penny short.

The amount of money it made flying one paying passenger a single mile rose 11.4 percent, thanks to higher fares.

Alaska Air Group Inc.'s profit jumped 35 percent to $122.4 million, or $3.32 per share. The company said it was its best quarter ever, and it beat the expectation of analysts. A year earlier it earned $87.6 million, or $2.46 per share.

United Continental shares rose 20 cents to close at $27.83. Dallas-based Southwest Airlines Co. shares rose 48 cents, or 3.7 percent, to close at $13.64, while shares of New York-based JetBlue fell 33 cents, or 4.8 percent, to $6.62. Alaska Air Group, based in Seattle, saw shares fall 14 cents to close at $49.27.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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