Lower fuel costs lead to strong Q3 results for U.S. airlines

DALLAS –U.S. airlines report strong third quarter results with lower fuel prices, more passengers and slightly higher fares helping support the financials of Southwest Airlines, American Airlines and United Airlines.


More passengers and lower fuel prices are pushing Southwest Airlines to record profits, and the airline expects an even bigger break at the gas pump this winter.

CEO Gary Kelly says the trend toward higher revenue has continued into October, and bookings for November and December look good.

Southwest Airlines Co. said Thursday that net income rose 27 per cent to $329 million, or 48 cents per share, in the July-to-September quarter.

Excluding one-time items such as the falling value of some fuel-hedging contracts, the profit would have been 55 cents per share. On that basis, analysts expected 53 cents per share, according to FactSet.

Revenue rose 5.6 per cent to $4.80 billion, a tick better than analysts’ forecast of $4.79 billion.

The average one-way fare inched higher – to $160.74, an increase of $1.35 from last summer. Passengers flew 5.6 per cent more miles, and planes carried record loads – the average flight was 84.4 per cent full, an increase from 80.8 per cent the year before.

Southwest spent $2.94 per gallon on fuel in the third quarter, down from $3.06 a year earlier. And the discount will grow – the airline predicted that it will pay between $2.70 and $2.75 per gallon in the fourth quarter.

Fuel spending dropped 4.4 per cent in the third quarter, but labour costs rose 7.2 per cent.

Southwest Airlines shares rose 85 cents, or 2.5 per cent, to $35.05 in premarket trading shortly before the market opening.

American Airlines

American Airlines Group Inc. (AAL) on Thursday reported third-quarter earnings of $942 million.

The Fort Worth, Texas-based company said it had profit of $1.28 per share. Earnings, adjusted for non-recurring costs, came to $1.66 per share.

The results topped Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.63 per share.

The world’s largest airline posted revenue of $11.14 billion in the period, which did not meet Street forecasts. Analysts expected $11.16 billion, according to Zacks.

American Airlines shares have risen 47 per cent since the beginning of the year.

United Airlines

United Airlines appears to be hitting its stride after struggling to make a 2010 merger pay off.

The airline’s formula is lower fuel prices and more revenue for every mile that passengers fly.

United Continental Holdings Inc. said Thursday that third-quarter net income soared to $924 million, or $2.37 per share, compared with $379 million a year earlier.

Excluding special items, the company said it earned a record adjusted profit of $1.1 billion, or $2.75 per share. Analysts, who usually exclude items, expected $2.70 per share.

Revenue rose 3.3 per cent to $10.56 billion, matching the forecast of analysts, according to a FactSet survey. It helped that so-called ancillary revenue rose 10.9 per cent as the average passenger paid more than $22 per trip in fees for things such as checked bags and more legroom.

Fuel spending fell 4.1 per cent, as the company paid $3.02 per gallon, a dime less than last summer. The figures included United Express regional flights.

United has been plagued by technology glitches that alienated customers; it struggled more than rivals to keep flying during bad weather; and it lagged other airlines when they turned solidly profitable. As recently as the first quarter of this year, United was still losing $609 million while key rivals set profit records.

But the Chicago-based airline earned a $789 million profit in the second quarter, beating Wall Street forecasts, and CEO Jeff Smisek said Thursday that the latest figures showed continued progress. He said the airline still has plenty of opportunities to increase profit margins “and improve the quality and efficiency of everything we do.”

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