US Airways, United Continental, Alaska Profitable but Fuel Prices Drag on Earnings
By Aaron Karp, ATW Daily News | Jul. 22, 2011
US Airways A320. Photo: Courtesy, US Airways.
Major U.S. airlines reporting second-quarter earnings Thursday were able to point to profitable results, though net income declined sharply year-over-year, owing mostly to high fuel prices and a sluggish economic rebound. "2011 could easily break 2008's record for highest fuel prices ever," US Airways Chairman and CEO Doug Parker told analysts and reporters.
US posted net income of US$92 million for the period, down 67.2% from a US$279 million profit in the 2010 June quarter. United Continental Holdings also was in the black for the second quarter, earning net income of US$538 million, down 11.9% from a US$611 million pro-forma profit for United Airlines/Continental Airlines in the year-ago period.
US's revenue lifted 10.5% to US$3.5 billion while expenses jumped 18.8% to US$3.33 billion, including a 53.8% surge in fuel costs to US$948 million. Operating income was down 52.2% to US$177 million. Parker noted that if fuel prices had remained consistent with the year-ago period, US's second-quarter fuel bill would have been US$400 million lower.
He pointed out that the pre-recession 2008 economy was better than the current economy, and fuel prices this year are just as high. "Yet in 2008 our industry lost about US$5 billion," he commented. "Analysts are forecasting profits for 2011. That is a major improvement and it's a result of significant structural changes ... That's not to say we're done. ... If the current economic environment is the new normal, which I think we should assume, then our industry will [continue to] adapt ... The biggest thing to help our industry since 2008 is consolidation."
Executives from both airline companies touted industry caution on capacity. UCH second-quarter mainline traffic was flat in the second quarter compared to the year-ago period at 47.49 billion RPMs on a 1.1% year-over-year increase in capacity to 55.48 billion ASMs on a pro forma basis. Average load factor of 84.1% was down 0.9 point. Mainline yield increased 10.3% to 14.46 cents. "Our capacity discipline drove solid unit revenue and yield growth," UCH Executive VP and Chief Revenue Officer Jim Compton stated.
Meanwhile, Alaska Airlines parent Alaska Air Group reported second-quarter net income of US$28.8 million, down 50.9% from a US$58.6 million profit in the prior-year period, on a 13.7% lift in revenue to US$1.11 billion.
"The underlying demand environment remains strong," US President Scott Kirby said.