WRAPUP 1-United, Southwest results mixed, but revenue improving
* United Airlines cuts costs to boost profit, but shares fall
* Southwest profit fell as expenses rose
* United, Southwest, Delta, US Air see revenue growth ahead
July 25 (Reuters) - Lower costs helped United Continental report higher-than-expected second-quarter profit on Thursday, but Southwest Airlines said its earnings fell on rising expenses and lower demand for travel.
Both carriers, echoing Delta Air Lines and US Airways Group on Wednesday, said revenue trends were improving, suggesting airlines could post profits in the summer, seasonally a strong period.
Shares of Southwest closed 0.4 percent higher at $13.81, while United's stock fell 1.9 percent to $34.30, with some analysts expressing disappointment at the airline's guidance for revenue per seat mile in the third quarter.
Alaska Air Group, a smaller carrier that recently started paying a dividend, reported a 53 percent rise in quarterly profit, but its per-share results were below expectations, and its shares fell 1.3 percent to $60.37.
"Revenues were lighter across the board from the airline group" in the second quarter, said Standard & Poor's analyst Jim Corridore in explaining share weakness among airlines on Thursday. Even so, he added, many carriers posted "record or near-record" earnings.
"I think the long-term picture for the airline industry is still bright," Corridore said.
Many U.S. airlines had weaker revenue in April and May as automatic U.S. budget cuts known as sequestration and economic weakness hampered travel. Now however, unit revenue, a measure of how full planes are and pricing power, is trending up.
Southwest said unit revenue was likely to rise 3 percent in July while United forecast 2.5 percent to 3.5 percent growth. US Airways, which is merging with AMR Corp's American to form the world's largest carrier, on Wednesday forecast a unit revenue rise of 4 percent for July.
Still, Southwest said U.S. government spending cuts and higher consumer taxes have affected government, business and leisure travelers. As a result, the carrier said it was less likely it will be able to reach its goal of a 15 percent pretax return on invested capital this year.
"The economy has been worse than what was assumed in our plan," Southwest Chief Executive Gary Kelly said during a conference call. "That has impacted our performance and it may continue to."
At United, second quarter earnings were $469 million, or $1.21 a share, up from $339 million, or 89 cents a share, a year earlier. Excluding items, profit was $1.35 a share, compared with $1.29 expected by analysts, according to Thomson Reuters I/B/E/S.
United had revenue of $10 billion, its highest ever for the second quarter. Its quarterly operating costs fell 1 percent, with fuel expenses falling 10 percent.
For July, the company said it expects passenger revenue per available seat mile to be up 2.5-3.5 percent, and third quarter consolidated PRASM to increase 3-5 percent.
Kristopher Kelley of Janus Group, which owns about 6 percent of United, said those forecasts were potentially below market expectations.
"I didn't have a point estimate per se, but I think intuitively people thought July PRASM would have been 200-300 (basis points) higher, and 3Q13 PRASM would have been 100-200 bps higher than what they guided to," he said.
At Southwest, overall costs rose 1.3 percent in the quarter even as fuel expenses fell 5.6 percent. Net income fell about 2 percent to $224 million, or 31 cents a share. Excluding items, profit was 38 cents a share, in line with the consensus analyst estimate.
Southwest's quarterly revenue rose less than 1 percent to $4.64 billion.