Higher Fares Put AirTran in Black

Rising fares and continued growth helped AirTran Airways offset higher fuel prices and post a 181 percent jump in second-quarter net profit.

"We've seen no resistance to fare increases," Chief Executive Joe Leonard said in an interview. "There seems to be plenty of demand."

AirTran Holdings, parent of the discount carrier, said Thursday it had its highest quarterly net profit ever, $32 million, vs. $11.4 million in the second quarter of 2005.

The strong showing put AirTran, based in Orlando but with a hub in Atlanta, back into the black after three consecutive quarterly net losses, though they were small. The company's net profit translated to 33 cents per share, up from 13 cents a share during the same time last year. Analyst forecasts averaged 28 cents a share for the three months that ended June 30.

Higher fares, tighter capacity and in some cases restructuring have lifted second-quarter results at several carriers.

Also Thursday, US Airways posted a $305 million net quarterly profit and said it expects a profitable third quarter and full year. The carrier endured two bankruptcy restructurings before merging with America West Airlines last year.

AirTran's profit came as jet fuel prices jumped 33 percent to an average of $2.26 a gallon.

AirTran has joined other carriers in raising fares to offset the fuel inflation, and its average fare during the quarter rose to $94.18, up 14 percent from $82.34 in the second quarter of 2005.

Customers have accepted the fare increases, Leonard said, because they are still reasonable, below that of many competitors and cheaper than long car trips with gas prices at about $3 a gallon.

Ray Neidl, an analyst with Calyon Securities, said fares were probably underpriced previously.

"This should have been done earlier," he said.

Neidl said he believes AirTran is also attracting more business travel, boosting average fares.

The airline added 23 percent more capacity in the quarter and expects to add about 25 percent for the rest of the year and 20 percent in 2007, Chief Financial Officer Stanley Gadek told analysts and investors on a conference call.

AirTran got seven jets in the second quarter, for a total of 14 new aircraft for the year. Two new destinations --- White Plains, N.Y., and Seattle --- were added.

There will be no more new destinations this year, but Leonard said the company could add up to five in 2007.

Leonard and Gadek said the key to profit during expansion is to keep nonfuel costs down. Those costs rose less than 2 percent, the company said.

AirTran's net income for the first half of 2006 was $27.4 million, or 29 cents a share.

That's a 721 percent increase from $3.3 million, or 4 cents a share, in the first half of 2005.

Profits for the first half of 2006 were below that of the second quarter because AirTran posted a loss of $4.2 million, or 5 cents a share, in the first quarter.

AirTran's stock rose 20 cents to close Thursday at $12.79.

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