US airline profits lift on cheaper fuel, strong demand

GMT 22:36 2014 Thursday ,23 October

Arab Today, arab today US airline profits lift on cheaper fuel, strong demand

US airlines
New York - AFP

US airlines Thursday gave a mostly upbeat outlook on industry conditions after posting large profit increases in the third quarter thanks to strong consumer demand and lower fuel prices.
Profits at American Airlines were $942 million, the highest in the airline's history and 87 percent above the combined year-ago earnings of American and US Airways prior to their merger.
United Continental's profits more than doubled to $924 million. Southwest Airlines, a big player in domestic flights in the US, saw profits lift 27 percent to $329 million, while JetBlue's earnings rose 11 percent to $79 million.
All four of the companies reported impressive gains in passenger revenue per available seat mile (PRASM), a closely watched industry benchmark.
The three-month stretch ending September 30 was "another terrific quarter," said Tammy Romo, chief financial officer at Southwest.
"As we move into fourth quarter, the demand environment remains solid and strong revenue trends have continued," she said.
"We have not seen any noticeable negative impact on demand from Ebola or macroeconomic news."
Romo said that Southwest's PRASM in October was currently about two percent higher than last year's level. Bookings in November and December are "also good," she said.
United offered a somewhat more cautious outlook, warning that intensifying competition on key China-US flights and the drop in the Japanese yen could pinch its PRASM by 1.5 percent in the fourth quarter.
In a securities filing, United projected that fourth-quarter PRASM could drop as much as one percent, citing an accounting benefit in the 2013 quarter.
- Lower fuel costs -
Analysts said the profit increases reflected higher fares enacted by several carriers as well as the gains from various cost-cutting initiatives.
Airlines were also able to reduce their spending on jet fuel due to lower oil prices and the benefits from fleet upgrades to more fuel-efficient models.
Fuel costs at United fell 4.1 percent to $3.1 billion. Spending in this category fell 1.3 percent at American and 4.4 percent at Southwest.
Airlines also notched higher revenues from additional fees, including for baggage and in-flight food, with United scoring a 10.9 percent gain in these "ancillary" revenues to $22 per passenger.
Quarterly revenues at United rose three percent to $10.56 billion, four percent at American to $11.14 billion and more than five percent at both Southwest and JetBlue.
Airlines said traffic in international markets remained strong despite a host of issues that have dominated headlines.
"Although the trans-Atlantic entity has experienced several recent pressures, including Middle East unrest, Ukrainian conflict, and more recently, concern about Ebola, we have not seen any meaningful impact on bookings to date," said United chief revenue officer Jim Compton.
On Wall Street, American shares gained 3.9 percent and United Continental rose 0.7 percent, while JetBlue fell 2.9 percent and Southwest lost 2.8 percent.

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