"Airline signs are upbeat"

Saturday, December 3, 2005

Airline signs are upbeat
Investors cheer reports from Continental, Southwest, American
By ERIC TORBENSON
The Dallas Morning News 


Big revenue rise for Continental Airlines Inc. in November? Check. Robust
traffic last month at Southwest Airlines Co. and American Airlines Inc.?
Check. 

A healthier airline industry appears ready for takeoff, and investors and
analysts warmed to the upbeat numbers on Friday.

Despite expected losses for the current quarter and year, most traditional
carriers are enjoying a fresh look from Wall Street.

"We believe this momentum is likely to continue at least for the next six
months, hence providing further lift to the stocks," said Michael Linenberg
of Merrill Lynch in a note to investors Friday. 

Impressive revenue

Houston-based Continental impressed analysts late Thursday with November
unit revenue figures - what it earned per seat mile flown - nearly 9 percent
better than last November. Mr. Linenberg and other analysts had expected an
increase closer to 6 percent.

What's even better is that average airfares are continuing to rise after
trending downward for much of the past few years. Airlines are flying fewer
seats and strong demand is giving them the ability to charge more, analysts
said.

The figures suggest that Continental might actually approach breakeven in
December despite very high fuel prices and previous forecasts for big
losses, Jamie Baker of J.P. Morgan said in a note to investors Friday.

With Continental being the only major carrier to release revenue
projections, analysts turn to traffic figures for insight into other
carriers, and those numbers provided their own holiday cheer.

Traffic growth

Dallas-based Southwest saw its traffic soar 16.4 percent over last year when
measured in revenue passenger miles, representing one person flown one mile.

Southwest's strong performance filled its planes more than last November
because the low-cost carrier increased its capacity by only 7.5 percent over
last year.

Southwest's load factor, a measure of paying passengers on board, rose 5.4
percentage points in November to 70.9 percent.

The outlook is brighter too at Fort Worth-based American, where traffic rose
6.6 percent compared with last November. American saw strength in domestic
operations, where traffic was up 6.2 percent, and international flying,
where traffic rose 7.5 percent.

American flew fewer domestic seats in November compared with last year,
shifting much of that flying overseas. The trend is expected to continue
next year for the airline as it seeks better average fares in international
markets that have less competition.

Shares of American parent AMR Corp. rose 77 cents to $17.74. Southwest
shares rose 7 cents to $16.59. Continental shares rose 74 cents to $16.85.


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