Tag Archives: NYSE:LCC; NYSE: AMR

Airline Earnings Season Kicks Off With a Bang

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It’s earnings season once again.

Technically the third quarter earnings season for the airline industry opened yesterday as Hawaiian Airlines reported its numbers. But today mere mortals were definitely made aware that the third quarter number parade had started as three of the industry’s major league hitters reported their third quarter results.

Today US Airways, AMR, parent of American Airlines, and Delta Air Lines opened up the spreadsheets to the public.

Verdict? All three airlines beat previous forecast numbers.

Let’s take AMR first.

AMR posted a 3Q profit of $0.39, excluding special items. This was a small beat over the analyst’s expected $0.32 figure. That translates to a net profit of $143 million, as opposed to the forecast $110 million figure. This is the first profit for the airline in two years.

Best 60-second analysis of the AMR numbers we’ve read so far come from Jamie Baker and Mark Streeter, analysts with JP Morgan who wrote,

Does labor & lack of alliance immunity fully explain AMR’s margin woes? AMR management routinely cites lack of alliance immunity (no longer the case starting this month) and its labor cost disadvantage (gradually diminishing) as key factors of its relative underperformance. But is that all? To wit: AMR’s 3Q 670 bps EBIT deficiency to its Legacy peers (based on UAL expectations) hasn’t been this bad since 3Q02, and in fact has worsened in recent years…despite higher labor costs at DAL/NWA and no apparent immunized alliance momentum at SkyTeam and Star. We would suggest diminished corporate momentum versus a bulked-up Delta (and soon, United) as possible causes…suggesting AMR may choose to rethink its role in ongoing industry consolidation.”

US Airways reported earnings of $1.23 a share, excluding special items, or $243 million. This was just a bit better than the analyst consensus forecast of $1.17 a share.

Trivia note of the day? This quarter US Airways posted a 10% operating margin. As Jamie Baker with JP Morgan noted in his note about the results, this represents a third quarter record margin performance for the airline. And not just “the current version” of US Airways. Jamie noted that they went back through all the predecessor companies, or at least as far as they could go back, and they couldn’t find a better third quarter performance posted by the company — ever. (He did admit that they could not find the financial records for Piedmont or PSA though.)

Finally, Delta Air Lines reported a profit of $929 million, or $1.10 a share, excluding one-time items. This was just above the forecasted consensus figure of $0.94. The reason for the upside here? Better than expected revenues.

Tomorrow? Four more big guns strut their third quarter stuff as we’ll hear the third quarter numbers from Southwest Airlines, Continental/United, JetBlue and Alaska.

Don’t be surprised if we hear of more upside surprises tomorrow, especially after the Air Transport Association issued much better than expected September RASM performance numbers last night. The ATA announced that September RASM for those airlines that report to the ATA rose 14.6%, topping most analyst forecasts. That better than expected result clearly helped give a little last minute boost to the industry’s third quarter performance — as the results from these three airlines today confirmed.