Higher fares help lift profits for U.S. airlines

07/24/2014 2:16 PM

07/24/2014 2:18 PM

Southwest Airlines is reporting a record profit for the second quarter, more than doubling its earnings from a year ago.

The company said it set records for passenger fares per mile and the percentage of seats sold on its planes during the April-to-June period. It said that bookings in July have been strong, with passengers paying about 3 percent more per mile than in July 2013.

Southwest was one of several U.S. airlines that reported substantially higher profits this week, as they benefited from higher fares and fuller planes.

Southwest Airlines Co. is in the midst of several big changes, including phasing out the AirTran Airways brand, starting international flights on Southwest, and expansion in Dallas and other key markets.

The Dallas-based company said Thursday that second-quarter net income rose to $465 million, or 67 cents per share, compared with $224 million, or 31 cents per share, a year earlier.

Excluding special items, the airline said it would have earned 70 cents per share. That beat Wall Street’s forecast of 61 cents per share, according to FactSet.

Revenue climbed 8 percent to $5.01 billion, topping analysts’ forecast of $4.94 billion.

Southwest said that passenger revenue per available seat mile, a closely watched number in the airline business, rose 9 percent, a sign that customers are paying higher average fares. Despite the higher prices, Southwest and AirTran filled 83.9 percent of seats on the average flight, up from 81.6 percent a year earlier.

The company caught a break at the fuel pump. Spending on fuel dropped 4 percent to $1.4 billion. Labor spending, however, rose 8 percent, also to $1.4 billion.

United tuns corner

United Airlines is making money after a slow start to the year.

The airline’s net income in the second quarter hit $789 million, topping Wall Street expectations and marking a turnaround from the first quarter when United was the only major U.S. carrier to report a loss.

The company also said Thursday that it will buy back up to $1 billion in shares over the next three years.

United has struggled to overcome technology glitches and other problems since the 2010 merger of United and Continental. The Chicago airline lost $609 million in the first quarter as it suffered through 35,000 weather-related flight cancelations.

But United closed the gap in the second quarter at the beginning of the peak summer-travel season.

So-called ancillary revenue – extra fees for things like checked bags and roomier seats – rose 8 percent per passenger.

United seems to be turning the corner, said Cowen and Co. analyst Helane Becker.

“The outlook for the company continues to improve,” Becker wrote, citing the company’s forecast of revenue per mile in the third quarter.

American adds dividend

Profit and revenue are up at American Airlines, and the company will share some of the gains with shareholders.

American Airlines Group Inc. said Thursday that it earned a record $864 million in the second quarter, up from the $507 million that American and US Airways earned separately a year ago, before their merger.

Excluding special charges, the company said it earned a record $1.46 billion, or $1.98 per share. Analysts surveyed by FactSet expected $1.95 per share.

Revenue rose 10.2 percent on a combined basis as passengers paid 6.5 percent more per mile for their tickets.

American said that it will pay a dividend for the first time since 1980, buy back up to $1 billion in shares, and spend $2.8 billion to pay off debt and aircraft leases.

CEO Doug Parker said the ability to make those expenditures while buying new planes and combining American and US Airways showed that the merger was a success.

Several big mergers in the past decade have reduced competition and helped the airlines control the number of flights and keep fares up.

American’s yield, or the amount that passengers pay per mile in fares, rose 6.5 percent over the same quarter last year. Domestic fares rose more quickly than those on international routes, where competitors have been adding flights.

Profits climb at Delta

On Wednesday, Delta Air Lines Inc. said its that second-quarter earnings rose 17 percent, as passengers flew more miles at higher average fares and fuel spending declined.

Delta said it benefited from gains in corporate contracts and domestic traffic. Like other airlines, Delta has been adding flights cautiously and instead is cramming more passengers on each plane. The average flight was 86.3 percent full, a figure that would have seemed impossible not long ago.

CEO Richard Anderson said Delta would continue its “disciplined approach” to adding new flights.

“This discipline continues to be a key driver of our success, as we will post record results for 2014,” Anderson said on a conference call with analysts. “We see a good demand environment, combined with modest capacity increases that will result in solid (revenue) growth.”

The average fare per mile climbed 3.8 percent, and Delta also collected more from what it calls merchandising, such as charging extra fees for a roomier seat and for priority boarding.

The company’s operating margin climbed to 15.1 percent, and it predicted margins of 15 percent to 17 percent in the third quarter.

Wichita Top Jobs

View All Top Jobs

Join the Discussion

The Wichita Eagle is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Terms of Service