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
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