US Airways, Delta Post Higher Quarterly Profits

US Airways Group Inc. and Delta Air Lines posted higher quarterly profits Wednesday and said the revenue environment ahead looks fairly good.

US Airways, which is in talks with bankrupt American Airlines about a potential merger, said third-quarter profit more than doubled to $192 million, or 98 cents a share, from $95 million, or 51 cents a share, a year earlier. That beat analysts' average estimates of 92 cents.

"That's our second-best third-quarter profit in company history," US Airways chief executive Doug Parker said during a call with investors.

At Delta, quarterly profit nearly doubled. Chief financial officer Paul Jacobson said production levels at the airline's Trainer refinery "are continuing to ramp up, and we are pleased with the initial results we are receiving from the facility."

Jet-fuel production at the former ConocoPhillips plant began last month. Delta said the refinery is on target to produce $300 million in annual fuel savings. "We remain confident in achieving that over the long term," Jacobson said. "We think the refinery is going to be a very quick payback."

Delta posted net income of $1.05 billion, or $1.23 a share, for the latest quarter, compared with $549 million, or 65 cents a share, a year earlier. Results included special items, such as a $440 million gain tied to fuel hedges. Excluding one-time items, Delta earned 90 cents a share, a penny less than analysts had expected. Fuel hedges, which are contracts to buy fuel in the future, were unrelated to the refinery.

"We are managing fuel, our top cost item, by taking the unique step of operating a refinery to address high jet crack spreads," Delta chief executive Richard Anderson told analysts. "We are working to change the cost dynamic in this industry around fuel and our results from Trainer . . . have validated our strategy."

Delta bought the refinery, which was idled last year, for $150 million. The airline said Wednesday it expects "a full production run rate" - 185,000 barrels a day - in November. The nation's second-largest commercial airline said the refinery's contribution would be "break even to $25 million" in the current fourth quarter.

Delta, which spent $11.8 billion on jet fuel in 2011 - about 36 percent of its operating expenses - expects to get about 50,000 barrels a day of jet fuel when the refinery modification is completed in 2013, Jacobson said. "We expect to get significantly more jet fuel than ConocoPhillips produced," which was 23,000 barrels a day.

On the US Airways investors' call, Parker cautioned listeners not to ask questions about a potential merger with American Airlines. "US Airways has entered into a nondisclosure agreement with American Airlines that precludes us from discussing any potential combination," Parker said.

American's unsecured creditors' committee and management have asked the bankruptcy court for a 30-day extension, until Jan. 28, to present a restructuring plan. The judge scheduled an Oct. 30 hearing.

The union representing American's 8,000 pilots publicly supports a merger with US Airways, as do American flight attendants and mechanics. The Allied Pilots Association told members in a memo this week that if discussions between US Airways and American don't pan out, "US Airways management will most likely pursue an alternate strategy that wouldn't involve securing AMR management's consent."

"It's probably safe to assume that AMR management is aggressively protecting their stand-alone plan and ability to retain control," the union said. "If US Airways management needs a few more weeks to make a deal that results in a reinvigorated American Airlines, that would be time well spent."

US Airways said it was "cautiously optimistic" about travel demand going forward. Leisure passenger demand has remained consistent, said the airline's president, Scott Kirby.

"Corporate and business travel still feel like they are waiting on some certainty on the election and resolutions of the 'fiscal cliff,' " Kirby said. That's when tax increases and spending reductions will kick in next year if Congress fails to act.

Contact Linda Loyd at 215-854-2831 or lloyd@phillynews.com.

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