Alaska, Hawaiian, JetBlue and Southwest rise above tide of legacy red ink


Swimming against the tide of red ink swamping US legacies, Alaska Air and Hawaiian Airlines notched up profits in what is traditionally the weakest quarter of the business cycle.

Alaska’s CFO Brandon Pedersen put first quarter net income of USD29.5 million down to two measures the carrier has in place to fight rising fuel costs: an insurance hedge programme that provides protection from oil price spikes “but allows us to take advantage of declines in price without triggering payments to counter parties”. Secondly, the carrier has a young and fuel-efficient fleet of B737s and Q400s.

It has successfully restructured its network to reduce or eliminate seasonality and is now only vulnerable when an outside force, such as swine flu, makes an appearance.

Read full article: Alaska continues to impress, return on invested capital hits 11.3%.

Faced with rising fuel costs and the Japanese earthquake and tsunami, Hawaiian Airlines posted a net profit of USD855,000 on operating revenues of USD365.6 million, up 22.5% year-on-year.

The airline reported the impact of the Japan quake was not as bad as the doom and gloom predicted by the Hawaiian hotel industry in the immediate wake of the disaster.

“Fuel prices have climbed further since then, creating a substantial challenge for all airlines, including Hawaiian,” said CEO Mark Dunkerley. “We will continue our focus on controlling those costs that lie within our grasp. At the same time, we expect that strong demand in our core markets, the recovery in Japan ... and, rising revenues will help offset some of the increase in fuel prices."

Read full article: Hawaiian posts profit in a sea of industry red ink.

With only one legacy left to report, the industry has collectively lost USD1 billion in the first quarter. Meanwhile, Southwest and JetBlue posted profits along along with Alaska Air Group.

US Airways posted a US114 million net loss or USD110 million ex special items on total operating revenues of USD2.96 billion. “We are not in a crisis state,” said CEO Doug Parker. “The current environment does nothing to compel or detract from consolidation issues.”

See related article: US Airways joins peers in 1Q loss. Consolidation "a long time from now" – CEO.

Delta posted a first quarter net loss of USD318 million, driven by the USD610 million impact of fuel which was 30% higher than first quarter 2010 and resulted in a 34%, or USD128 million, swing for its 1Q2010 results.

“Analysts expect the US industry to generate profit in 2011 with jet fuel at USD135 per barrel,” said CEO Richard Anderson. “That is very remarkable. But we still have a lot of work to do to make us consistently profitable no matter what the cost of fuel is.”

See full report: Delta follows other legacies in net loss, revenue increase greater than fuel.

As expected, with the harsh weather and multiple disasters during the first quarter, United Continental Holdings posted a net loss of USD213 million on a GAAP basis, the company reported Thursday.

CEO Jeff Smisek pointed out that fuel-saving initiatives, including the use of ground power instead of auxiliary power units (APUs) showed positive early results, saving the airline 200,000 gallons per month for an annual run rate of 7.5 million gallons on a run-rate basis once all APU initiatives are implemented.

See related article: United Continental joins American in posting net loss.

JetBlue followed fellow low-cost carrier Southwest in posting a profit for the first quarter, when it reported USD3 million in net income, a USD4 million swing from the USD1 million net loss posted in 1Q2010.

Read the report: JetBlue in USD4m swing to profitability in 1Q2011 as revenues exceed expectations.



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