United Airlines narrows 3Q2009 losses; Citigroup initiates coverage of select carriers

The majority of North and South American carriers’ stocks were up on Tuesday, following the release of improved 3Q2009 financial results from United Airlines (+8.8%), Allegiant (+4.6%) and Hawaiian Airlines (+0.1%). The AMEX Airline Index rose 0.9% as a result. The wider market slipped, with the Dow ending trading down 0.5%.

United Airlines narrows 3Q2009 losses

United Airlines (+8.8%) reported a GAAP net loss of USD57 million, or USD0.39 per basic share, narrowing its net loss by USD202 million year-on-year, beating analysts’ expectations of a loss of USD0.94 per basic share. Consolidated passenger revenue per ASM (PRASM) meanwhile declined 14.7% year-on-year, a 2.5 ppt improvement compared to the 17.2% decline in 2Q2009.

The carrier also delivered non-fuel unit cost reductions for the third consecutive quarter, with mainline unit cost per ASM (CASM) for the quarter down 1.6% year-on-year, excluding fuel and certain accounting charges, despite a reduction in mainline capacity of 8.2% year-on-year.

Commenting on the results, United Chairman, President and CEO, Glenn Tilton stated "against a challenging environment…we are poised to see better year-over-year unit revenue performance as economies begin to recover and business travel returns," Mr Tilton added the carrier now has “cautious optimism” on early signs Business demand is starting to improve, stating "our network is by design [more exposed] to corporate and premium customers than the rest of the industry, and with the onset of the recession…our network moved from historically outperforming industry unit-revenue growth to modest underperformance…As we see early signs of recovery in business and premium demand, we are also beginning to see our relative out-performance return,"

In its 2009 outlook, the carrier stated it expects mainline CASM, excluding fuel, profit sharing and certain accounting charges for the full year 2009 to be down 0.5% to flat year-on-year. Since the company's original guidance in Jan-2009, it has reduced its projected full year mainline non-fuel costs by more than USD350 million.

Hawaiian Airlines reports net income of USD30.7 million

Hawaiian Airlines (+0.1%) meanwhile reported a consolidated net income for 3Q2009 of USD30.7 million, or USD0.58 per diluted share, on total operating revenue of USD305.6 million, including a one-time tax benefit of approximately USD20 million. This result compares to net income of USD6.0 million, or USD0.12 per diluted share, on total operating revenue of $339.9 million for 3Q2008. The carrier's operating income of USD23.7 million for the period compares to USD27.3 million in 3Q2008.

Allegiant (+4.6%) stocks were also up following its 3Q2009 results. The LCC reported a net income of USD13.8 million, up 181.7% year-on-year.

AirTran (+0.6%), Alaska Airlines (+2.2%), American Airlines (+2.8%) and Continental (+1.5%) are expected to report their 3Q2009 results on 21-Oct-2009.

Citigroup initiates coverage of select carriers

Citigroup initiated coverage of Air Canada (0%), American Airlines (+2.8%), JetBlue (+1.4%) and Southwest (+0.8%) during trading. Ratings are as follows:

North & South America selected airlines daily share price movements (% change): 20-Oct-09