US Airways Profit Rises on Higher Fares, Demand

US Airways Group swung to a third-quarter profit from a year-ago loss, topping Wall Street forecasts on strong demand and rising fares, the airline said Thursday.

It also reflects the resilience of the recovering airline industry to economic weakness and soaring fuel prices. Airlines were consistently profitable in the quarter, according to results released so far.

In an interview on CNBC, US Airways Chairman and Chief Executive Douglas Parker was optimistic about the results.

"We reported earnings that were up, on a year-over-year basis, about 84 percent," Parker said. "It was revenue-driven, which is great when there's a high demand for our product, and, for the first time in quite some time, the industry is able to pass along higher fuel prices, as we need to to be profitable. It's good news for the industry, and it's great news for US Airways."

The U.S. airline industry is rebounding from a years-long downturn triggered in part by a wave of low-fare competition and exacerbated by soaring fuel prices. In 2006, the industry began cutting excess capacity -- the number of seats for sale -- and started raising fares accordingly.

The fare increases helped offset high fuel prices. The cost of jet fuel is directly related to the cost of oil, which hit a record high above $90 a barrel last week.

The strategy helped major airlines like AMR, parent of American Airlines, and UAL, parent of United Airlines, post profits in the third quarter despite growing signs of economic weakness that threatens to erode travel demand.

"Everybody has been meeting or exceeding our estimates. It's been a good summer," said Calyon Securities analyst Ray Neidl. "But more importantly, most carriers are saying demand is strong going into the fall, which means we'll probably be seeing some (fare) increases."

US Air Sees Profit

US Airways , formed in 2005 from a merger of America West and US Airways, said its third-quarter profit amounted to $177 million, or $1.87 per share, compared with a year-ago loss of $78 million, or 88 cents per share.

Excluding one-time items related to the merger and to fuel hedging, the No. 7 U.S. carrier earned $1.96 per share. On that basis, Wall Street analysts had expected US Airways to earn $1.71 per share, according to Reuters Estimates.

US Airways said third-quarter revenue was $3.04 billion, a 2.3 percent increase from the year-ago quarter.

The airline said its fuel bill declined 3.8 percent year over year, and its average fare increased 1.2 percent. US Airways said its passenger revenue per-available-seat mile increased 6.5 percent, while its costs per-seat mile fell 2.6 percent. Excluding fuel and gains related to hedging instruments, however, costs increased 5.7 percent.

The company ended the quarter with $3.1 billion in total cash and investments, of which $500 million was restricted. US Airways shares initially rose on trghe news, but at mid-morning were down 50 cents at $28.24 on the New York Stock Exchange.

Also on Thursday, Alaska Air Group, parent of Alaska Airlines, reported a third-quarter profit, reversing a year-earlier loss, on higher revenue and lower costs.

Net income was $85.8 million, or $2.11 per share, compared with a net loss of $17.4 million, or 44 cents per share, a year ago.

Wall Street analysts expected earnings of $1.93 per share, according to Reuters Estimates. Alaska Airlines shares rose 83 cents to $26.40 on the NYSE.

CNBC.com contributed to this report.

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