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Airlines posted mixed earnings results Tuesday, as Southwest Airlines and United Airlines' parent UAL beat, while the swine flu caused Continental Airlines profits to slump.
Southwest [LUV
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] posted a quarterly profit after three straight quarters of losses as lower costs boosted its bottom line.
Southwest earned $54 million, or 7 cents per share, in the second quarter, compared with $321 million, or 44 cents per share, a year ago. Excluding special items, Southwest earned $59 million, or 8 cents per share.
Analysts, on average, expected 7 cents per share, according to Reuters Estimates.
Shares fell more than 6 percent on the New York Stock Exchange. Revenue fell about 9 percent to $2.6 billion, while unit costs fell 4.6 percent. The Dallas-based airline said it continued to see the benefits of the drop in oil prices from last summer.
The low-cost carrier also said about 1,400 employees, or roughly 4 percent of its workforce, opted to participate in a voluntary buyout program during the second quarter. Southwest expects $70 million in additional costs in 2009 and 2010 from the early-out program. Southwest said its economic fuel costs fell 22.8 percent to $1.79 per gallon, including taxes.
Still, Southwest CEO Gary Kelly told CNBC that weak travel demand and volatile fuel prices will likely bring a third quarter loss for the company. Barring a rebound in the economy, Southwest expects third quarter unit revenue to fall more than the 6 percent decline seen during the second quarter due to more difficult comparisons, the company said.
"As far as business travel goes ... there's no evidence of any improvement at all any time soon," Kelly told CNBC. "We've got a very tough second half in front of us." (See the full interview above)
Based on Southwest's third quarter derivative position and current energy prices, Southwest expects third quarter jet fuel costs to fall sharply to about $2.15 per gallon.
Southwest currently has derivative contracts in place for more than 30 percent of its third quarter fuel consumption.
Swine Flu Hurts Continental
Continental Airlines [CAL
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] posted a steeper second-quarter loss as the slump in business travel and fears about the H1N1 virus hurt revenue, and said it will cut its work force by 4 percent.
The airline also increased its domestic checked bag fee by $5, effective Aug. 19, for those not prepaying online.
The net loss widened to $213 million, or $1.72 per share, from $5 million, or 5 cents per share, a year ago.
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David J. Phillip / AP |
Excluding $44 million in special charges from the declining value of its aircraft, Continental lost $169 million, or $1.36 per share.
Revenue dropped 22.7 percent to $3.1 billion as business travelers cut back on travel or bought cheaper economy-class tickets. The H1N1 virus, once known as swine flu, cost the carrier about $50 million in passenger revenue.
The Houston-based company will cut 1,700 jobs and increase the bag fee as it grapples with the sharp revenue decline.
The carrier aims to generate about $100 million in annual benefits when the measures are fully implemented in 2010.
In addition to the bag fee, Continental increased its telephone reservation service charge by $5, effective immediately. The company said other revenue initiatives will be coming.
The new round of planned job cuts come after it eliminated 500 reservation agent positions. The company also offered leaves of absence for 700 flight attendants as well as employee voluntary furlough programs.
Mainline passenger revenue fell 22.9 percent on lower fares and a decline in passenger traffic. Mainline capacity shrank 7.3 percent in the quarter.
Continental is expecting delivery of seven Boeing 737 aircraft in the second half of 2009. The company looks to remove 29 additional Boeing 737s from service by January 2010.
United Parent Posts Profit on One-Time Gains
The parent of United Airlines said it is cutting international capacity by an extra 7 percent during the last four months of this year, as it posted a $28 million second-quarter profit due to fuel hedge gains and other one-time items.
UAL said that the international capacity reductions it is planning starting in September are part of an effort by the Chicago-based airline company to better match supply with demand.
Its shares rose nearly 7 percent, to $3.75 in Tuesday trading.
The earnings were equivalent to 19 cents a share in the three months ended June 30, compared to a loss of $2.74 billion, or $21.57 a share, a year ago.
Excluding one-time items, UAL [UAUA
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] said it lost $2.23 a share in the quarter. Analysts surveyed by Thomson Reuters had been expecting a loss of $2.61 a share excluding items.
Revenue fell 25.2 percent to $4.02 billion from $5.37 billion a year earlier. Analysts had been expecting revenue of $4.04 billion in the latest quarter.
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Jacquelyn Martin / AP United Airlines |
The parent of the nation's third-largest airline said it ended the quarter with $2.6 billion in unrestricted cash, ahead of its previous projection of $2.5 billion. The company raised an additional $155 million earlier this month through a spare parts financing transaction. That money will be included in its third-quarter figures.
Airlines have been hit hard by falling demand for air travel, especially among business customers.
UAL reported a year-over-year 17.2 percent decline in second-quarter consolidated passenger unit revenue per available seat mile.
Carriers have been cutting costs and adding new fees or increasing existing ones to weather the downturn. There also has been deep discounting of fares from time to time.
United said it has cut planned capital expenditures to $300 million, a reduction of $150 million from the $450 million the company originally planned for 2009.
For the first half of the year, UAL posted a net loss of $354 million, or $2.44 a share, compared to a loss of $3.29 billion, or $26.52 a share, for the same period a year ago. Six-month revenue fell 23.5 percent to $7.71 billion, compared to $10.08 billion a year earlier.
—AP contributed to this report
Data is a real-time snapshot *Data is delayed at least 15 minutes