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US Airways profits on the rise; American Airlines reports narrower net loss; Delta down

22-Jul-2010

North and South American carriers’ stocks were down on Wednesday (21-Jul-2010) after disappointing financial results from American Airlines, Allegiant and AirTran. A 1.1% decline in the Dow also pushed airline stocks lower, after Yahoo! Reported disappointing financial results.

US Airways' profits on the rise

US Airways (+3.3%) was one of the day’s few gainers, after the carrier reported a net profit of USD279 million for the three months ended 30-Jun-2010, or USD1.41 per diluted share, compared to a net profit of USD58 million, or USD0.42 per diluted share, in the previous corresponding period. The result was its first profitable quarter in almost three years.

Total revenues in the second quarter were up 19.3% year-on-year. The carrier stated this improvement was driven by higher passenger yields, due to an improving economy, resulting in greater demand for business travel. Total revenue per ASM (RASM) rose 18.9% to USD 14.37 cents. Total operating expenses in the second quarter were up 10.4%, primarily due to a 38.7% increase in mainline and Express fuel expense. Mainline cost per ASM (CASM) in the second quarter was USD 11.48 cents, up 10.0%.

Moody's Investors Service raised its outlook of the carrier from ‘negative’ to ‘stable’ as a result, while also affirming a corporate family rating of ‘Caa1’, citing US Airways’ “stable outlook”. Standard & Poor's meanwhile reiterated their ‘buy’ rating and increased the carrier’s 12 month price target from USD10 to USD12.

CEO, Doug Parker, attributed the performance to cost cuts and increased ancillary revenue. According to an IdeaWorks/Amadeus ancillary revenue study released during trading, US Airways was the seventh largest ancillary revenue earner of carriers worldwide in 2009, generating USD690.3 million. United Airlines (-1.9%), American Airlines (-3.4%) and Delta Air Lines (-5.5%) made up the top three carriers, reporting ancillary revenues of USD2 billion, USD1.9 billion and USD1.4 billion, respectively.

See related report: US Airways joins the 2Q2010 profit club

American Airlines reports narrower net loss

American Airlines (-3.4%) declined after the carrier reported a net loss of USD10.7 million for 2Q2010, or USD0.03 per share, compared to a net loss of USD390 million in 2Q2009. The carrier narrowed its losses with a 14% year-on-year increase in average fares, leading to a 16% rise in revenue, to USD5.7 billion.

American attributed the loss to the impact of significantly higher fuel prices year-on-year. Including the impact of fuel hedging, the carrier paid nearly USD334 million more for jet fuel in the second quarter, at an average of USD2.37 per gallon, than it would have paid at prices prevailing in 2Q2009, when it paid USD1.90 per gallon.

More positively, consolidated passenger revenue per available seat mile (PRASM) grew 16.7% year-on-year, while mainline unit revenue at American grew 16.8%. The carrier stated tight capacity control that drove higher load factors and improving economic conditions drove higher unit revenue. Passenger yield meanwhile rose 14% year-on-year. However, mainline unit costs in the quarter increased 3.5%, excluding fuel costs and 2009 special items. Trans-Atlantic cancellations caused by the eruption of the Icelandic volcano reduced operating earnings by an estimated USD17 million.

See related reports:

Allegiant net profit declines

Allegiant (-5.6%) meanwhile suffered the biggest decline of the day, after reporting a 26.4% decline in net profit for 2Q2010, to USD17.6 million.

See related report: Allegiant reports declining net profit at USD17.6 million on fuel rise

Elsewhere, Air Canada (+7.9%) continued to rise off strong results reported the day prior, while LAN (+3.5%) also continued to gain. Delta Air Lines (-5.5%) and Hawaiian Airlines (-4.2%) fell heavily.

North & South America selected airlines daily share price movements (% change): 21-Jul-2010


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