Delta, US Airways Earnings Top Forecasts
Delta Air Lines and US Airways reported fourth-quarter profits on Wednesday that topped analysts' projections as higher fares helped offset an increase in jet-fuel prices.
Delta's profit, excluding some items, more than doubled to $379 million, or 45 cents a share. That exceeded an estimated average of 38 cents projected by 15 analysts for Bloomberg. US Airways' earnings on that basis fell to 13 cents a share, topping the average forecast of 3 cents.
Planes flew more than 80% full after carriers cut the number of seats made available, which allowed the airlines to boost fares and report higher revenue than analysts anticipated. That helped mitigate an average 26% gain in fuel prices. Strong travel demand and revenue growth are continuing in 2012, both companies said.
"The fourth quarter marks a turnaround in the space, and the industry has proven that they can be profitable at $100-a-barrel oil," said Helane Becker, a Dahlman Rose & Co. analyst who recommends buying Delta stock and holding US Airways.
"We're getting some very good guidance for the first quarter, and that underscores for us that we don't think the industry is seeing a downturn," she said
Southwest Airlines, the largest carrier of passengers in the U.S., posted a profit last week that also topped analysts' estimates. United Continental is to report results today.
Doug Parker, US Airways CEO, confirmed his airline's interest in exploring a deal with American Airlines parent company AMR, which is in bankruptcy. He said Millstein & Co., Barclays and the law firm of Latham & Watkins have been hired to help US Airways evaluate options.
TPG Capital and Delta also are evaluating possible bids for American, it has been reported. TPG and Delta have said they won't comment about any interest in American, and Delta CEO Richard Anderson deflected a question on industry mergers on Wednesday.
AMR has declined to discuss any merger-related questions. CEO Tom Horton has signaled his interest in keeping the airline independent, telling employees in a memo on Tuesday that the company is working to "help American get back on top."
Net income at Delta surged to $425 million, or 50 cents a share, from $19 million, or 2 cents, a year earlier.
The results included a $164 million gain on fuel hedges, a $43 million gain related to a slot-trade at New York's LaGuardia with US Airways, $81 million to write down the value of aircraft and $80 million for debt retirement and severance.
Fuel costs rose about 5% to $2 billion. Revenue gained 8% to $8.4 billion for Delta's main jet operations and regional carriers.
US Airways' net income declined 36% to $18 million, or 11 cents a share, from $28 million, or 17 cents, a year earlier, the airline said. The results included $2 million in legal fees related to arbitration of auction rate securities and $1 million in costs tied to its US Airways Express unit.
An 8.5% increase in revenue gave US Airways a record $3.2 billion for the quarter. That helped offset a 29% boost in its average price per gallon of fuel.
The airline is the only major U.S. carrier that doesn't use hedging, or advance contracts at a fixed cost, to help protect against volatility.
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