"United Air, JetBlue post profits on fare hikes"

Tuesday, October 23, 2007

United Air, JetBlue post profits on fare hikes


CHICAGO (Reuters) - UAL Corp, parent of United Airlines, and low-cost rival
JetBlue Airways Corp both posted better-than-expected results on Tuesday as
each flew fuller planes and collected higher fares. 

The profits added to those reported last week by other carriers and
reflected the improving condition of the U.S. airline industry, which has
been battered in recent years by low-fare competition and expensive fuel. 

Efforts by carriers to limit the seats for sale and charge more for them
have ignited a recovery despite signs of U.S. economic weakness and
skyrocketing energy prices. 

"(There) has been a lot of discussion recently about a weakening economy and
its potential effect on travel demand," UAL Chief Revenue Officer John Tague
said on a conference call with analysts and reporters. 

"From our perspective, we are not seeing any evidence of a slowdown in
demand. Looking close at the fourth quarter, we expect strong and balanced
unit revenue growth both internationally and domestically," he said. 

UAL REVENUE MANAGEMENT 

The profit for United, the No. 2 U.S. carrier, was "driven by our continued
discipline in managing capacity, aggressively controlling inventory to
improve revenue results," Chief Executive Glenn Tilton said in a message to
employees. 

UAL said its third-quarter profit rose to $334 million, or $2.21 per share,
from $190 million, or $1.30 per share, a year earlier. 

Excluding special items, largely related to the carrier's 2006 bankruptcy
exit, UAL said it earned $1.96 per share. On that basis, Wall Street
analysts had expected UAL to earn $1.88 per share, according to Reuters
Estimates. 

The company said pretax income, excluding special items, was $498 million, a
gain of $279 million from the year-ago quarter. 

UAL said passenger revenue, excluding special items, it collected on the
flights it owns and operates increased by 9.7 as it cut capacity -- the
number of seats for sale -- by 1.5 percent and increased average fares by
8.2 percent. 

The company said revenue rose 6.8 percent in the third quarter to $5.53
billion. UAL paid 3.2 percent less for fuel. 

UAL said, however, that it expects its full-year costs per available seat
mile to increase by 2.5 percent. 

The carrier said it expects to trim its capacity by up to 1.5 percent in the
fourth quarter, with cuts centered on domestic routes, while boosting
capacity by as much as 5.5 percent in international routes where it faces
less competition. UAL plans to continue that strategy into 2008. 

Calyon Securities airline analyst Ray Neidl called UAL's results
"impressive," saying the carrier owes its success to the shift of capacity
to international routes. 

"It can continue, possibly not to the same degree but these guys are doing a
great discipline job in reducing capacity and getting away from the
traditional way that airlines think," Neidl said. 

"In addition, they have an international advantage of a large Pacific and
China route authority where demand is strong and seats scarce, enabling
price increases and limited discounting," he said. 

Shares of UAL, which rose almost 15 percent in the third quarter, climbed
$2.32, or 4.8 percent, to $50.45 on Nasdaq at mid-afternoon. 

JETBLUE, TOO 

JetBlue, meanwhile, returned to third-quarter profitability on stronger
revenue, nearly doubling Wall Street forecasts. 

The airline posted net income of $23 million, or 12 cents per share,
compared with a net loss of $500,000, or nil per share, in the comparable
year-ago period. 

The profit, nearly double the Wall Street forecast of 7 cents per share,
according to Reuters Estimates, lifted JetBlue shares 62 cents, or 6.8
percent, to $9.70 on Nasdaq. 

The carrier saw its fares rise 7 percent on average, which helped drive a
21.9 percent increase in operating revenue in the quarter. JetBlue filled 82
percent of its seats compared with 80.4 percent a year earlier. 

JetBlue Chief Executive Dave Barger said on a conference call that bookings
for Thanksgiving are strong and the carrier expects similar demand for the
December holidays. 

Unit revenue growth -- a key measure of revenue performance -- is forecast
at between 2 percent and 4 percent for the fourth quarter, and 5 percent and
7 percent for the full year. 

JetBlue expects an operating margin in the fourth quarter of 3 percent to 5
percent. 

Barger also said the launch of Virgin America in September on
transcontinental routes out of San Francisco and Los Angeles cut into
JetBlue's West Coast business. He did not provide specifics but said the
impact did not exceed expectations.

 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************