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Airline companies have positive view of revenue trends

Thu., July 10, 2014

Three of the biggest U.S. airlines are giving upbeat signals about their business as the peak summer travel season kicks into high gear.

American, United and Southwest indicated that a key revenue figure was higher than in the same period last year, and American also raised its forecast for profit margin in the second quarter.

Shares of airline stocks rose.

Since a series of big mergers that started in 2008, airlines have kept a lid on flights, which helps keeps fares high enough to overcome higher fuel prices. On Wednesday, American Airlines Group Inc. said passenger revenue for every seat flown 1 mile would be 5.5 percent to 6.5 percent higher in the second quarter than in the same period last year. That’s an important statistic, and it rises when airlines fill more seats and passengers pay higher average fares.

The company raised its profit-margin forecast for the quarter to between 12 percent and 13 percent, up from 10 to 12 percent. Cowen and Co. analyst Helane Becker said the new margin forecast “provides further evidence that (the second quarter) was a very strong quarter for the airlines.”

American also said it expects to post non-cash charges of up to $630 million in the second quarter to cover the tax effects of selling fuel-hedging contracts and its bankruptcy reorganization, which ended in December with the merger with US Airways.

United Continental Holdings Inc. said the per mile revenue figure rose 3.5 percent in the April-to-June quarter compared with a year earlier, which beat the company’s April forecast of a gain between 1 percent and 3 percent. United cited better-than-expected performance in the Pacific and the U.S.

United also said second-quarter costs per mile, excluding fuel, would be flat instead of higher, which it had previously forecast.

Southwest Airlines Co. said per-mile revenue jumped by between 7 percent and 8 percent last month compared with June 2013. For the entire quarter, the figure grew more than 8 percent, said the Dallas company, which also owns AirTran Airways.

American shares rose $1.73, or 4.3 percent, to close at $41.99. United gained 53 cents to $40.07; Southwest gained 51 cents to $27.21; and Delta Air Lines Inc. rose 52 cents to close at $36.96.


 

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