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Airlines Post Mixed Results

Airlines Post Mixed Results
By: Sam Quest
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The US airline industry, which had outperformed a broadly turbulent market this year, gathered speed as Delta Air Line Inc. (DAL) released its financial results yesterday. The news that Delta had beat its earnings estimates led to many companies announcing results for their respective, recently concluded quarters early. Many companies released their earnings during premarket trading, and essentially, it was a mixed bag of results for the airline industry, with some of the players seeing their respective stock price increase while others saw theirs tank. The biggest mover of the day was United Continental Holdings Inc. (UAL), which saw its stock price fall by nearly 5.5%.

Legacy Carriers

Delta Air Lines, which was the first among the legacy carriers to announce its quarterly results, said that the company generated a loss of $1.33 per share in the first quarter of its 2014 fiscal year (1QFY14; ended March 31, 2014), beatings estimates by three cents. The company’s revenues, however, fell 0.2% on a year-over-year basis (YoY) to come in at $8.7 billion for the same time frame.

The news was followed by United Continental and the newly formed American Airlines Group (AAL) announcing their performance results in premarket trading today. United blamed harsh weather conditions for the loss of $200 million recorded in 1QFY14. The company also announced that its passenger revenue per available seat mile (PRASM) declined 2%. About 1.5% of the decline is attributable to weather related cancellations and delays.

On the other hand, American Airlines Group beat sell side estimates of 48 cents per share by recording earnings of $1.54 per share. The company saw its revenues go up by 63.8% on a YoY basis, however, the increase did not meet the Street’s expectations.

American Airlines Group was able to post record profits as a newly formed entity within its first full quarter of operations. The company’s PRASM improved nearly 3% on a YoY basis to $0.1367 while operating expenses declined by almost 0.33%. The stock went up nearly 2.5% in the trading session yesterday.

Low Cost Carriers

Southwest Airlines Co. (LUV), the largest airline among the low cost carriers, announced that its revenues grew by over 2% on a YoY basis to come in at $4.17 billion for 1QFY14. The company also recorded earnings of 18 cents per share, beating the Street’s estimates by two cents.

Southwest posted a record net income of $152 million in 1QFY14, largely because its operating expenses declined by 1.6% on a YoY basis. The company attributed the decline in its operating expenses to lower fuel costs; fuel expenses declined from an average of $3.29 per gallon in 1QFY13 to about $3.08 per gallon in 4QFY13. The stock, despite the positive financial results, has remained essentially flat so far in to the trading session.

On the other hand, JetBlue Airways Corporation (JBLU) has so far seen its stock tumble 4% in today’s trading session, largely because the company announced lower-than-expected earnings results for 1QFY14. JetBlue posted earnings of one cent per share, while the Street had projected that the company will record earnings of seven cents per share. The company’s revenues grew by 3.8% on a YoY basis to $1.35 billion, but lagged behind the Street’s estimates by $30 million. JetBlue saw its yield per passenger mile improve 1.8% to $.142 as its PRASM increased by nearly 1%. The metric increased 1.1% if the company accounted for a drop of three percentage points due to Easter and Passover holidays being shifted from March in 2013 to April this year.

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