Continental and Southwest profitable, but airlines not out of the woods yet – US Share Wrap

Continental Airlines' shares dropped 2.3% in trading yesterday, falling in line with the general market after positive morning trading, despite a small 4Q2009 net profit and a positive, albeit cautious and conservative, outlook for 2010.

After taking out USD77 million in special charges and a USD158 million on-cash income tax benefit, Continental reported a net profit of USD4 million in 4Q2009, better than analyst expectations. The carrier announced a full year loss of USD282 million, less than half of last year’s 586 million loss.

See related report: Continental: Curb your enthusiasm despite 4Q2009 profit

The carrier’s new Chairman, President & CEO, Jeff Smisek, is not certain that the recovery in long-haul premium travel is yet cause for optimism, stressing that airline faces “a long and slow road to recovery”. Continental plans to increase capacity by approximately 1.2% in 2010, but unit revenue is expected to fall 3% in 2010, with mainline unit revenue down 4%.

Shares in Southwest Airlines, rose 3.1%, after the airline reported a profitable fourth quarter and full year. See related report: Southwest Airlines posts 37th consecutive annual profit

Other US LCCs were also stronger, with Allegiant and AirTran finishing higher.

Gol and Tam suffered sharp share price drops, due to concerns in South American markets about a stalling economic recovery and potential harm on the outlook for airlines and more economic jitters in Brazil over material exports to China. GOL was down 7.4%, while TAM fell 6.9%. LAN Chile also fell, down 2.0%.

WestJet and Air Canada got off lightly, after Canadian stocks recorded their largest single day decline since Oct-2009. Canadian markets dropped to a one month low, reacting to mixed economic news from the US and China. Bank of Canada Governor, Mark Carney, also helped put a dampener on Canadian stocks, setting 2% as a realistic growth target for the Canadian economy beyond 2011, citing low productivity growth and an aging workforce. WestJet was down 1.5%, while Air Canada gained 0.8%.

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