* Delta, US Airways say corporate revenue strong
* Delta cites cost savings from refinery
* US Air expects merger completion expected this quarter
By Karen Jacobs
July 24 Delta Air Lines and US Airways
Group reported higher-than-expected quarterly profits as
fuel costs decreased, and both airlines said demand was
improving after weakness earlier this year.
Both airlines said unit revenue, a measure of how full
planes are and pricing power, would rise in July. Shares of
Delta and US Airways were higher in afternoon trading.
U.S. airlines have scaled back flying, ended money-losing
routes and gained new revenue sources with bag and seat fees to
Mergers have also helped airlines cut costs, and US Airways
said it and AMR Corp's American Airlines were on track to
complete their merger and form the world's biggest carrier in
the current quarter.
Darryl Jenkins, chairman of the American Aviation Institute,
said the quarterly results showed airlines were managing their
operations well despite challenges they faced raising prices in
recent months in the wake of economic skittishness and
government spending cutbacks.
"Fares are a tad weak right now; nobody is able to get a
reasonable fare increase to stick," Jenkins said. "Both of those
companies are very well managed."
In the second quarter, US Airways and Delta had difficulty
raising yields, a measure of the average fare paid per mile
flown. Delta's passenger yield was flat, while yield at US
Airways fell 2.8 percent.
The airlines signaled business was looking strong for the
next few months. The summer is seasonally a favorable period for
airlines as consumers take vacations, and Delta and US Airways
also said corporate demand was up.
Delta said unit revenue, which is also called passenger
revenue per available seat mile, would likely rise 3 percent in
July, and US Airways forecast a rise of 4 percent for that
month. Unit revenue had weakened in April and May at many U.S.
"Stronger consumer confidence, business confidence and
macroeconomic performance seem to be combining to drive the
improved revenue environment," US Airways President Scott Kirby
said during a conference call.
Net income at Delta was $685 million, or 80 cents a share in
the second quarter, compared with a loss of $168 million, or 20
cents a share, a year earlier. Adjusted for items, profit was 98
cents a share, compared with 95 cents expected by analysts on
average, according to Thomson Reuters I/B/E/S.
Delta's quarterly revenue fell $25 million to $9.71 billion.
While passenger revenue rose about 1 percent, cargo revenue slid
11 percent. Other revenue, which includes maintenance and
baggage fees, fell about 6 percent as Delta ended some
Operating costs at Delta dropped 8 percent, with fuel
expenses down 21 percent in the quarter. Delta said production
of fuel at the Pennsylvania refinery it bought last year was
increasing the total market supply of jet fuel, helping lead to
a drop in its fuel costs.
At US Airways, second-quarter earnings were $287 million, or
$1.40 a share, compared with $306 million, or $1.54 a share, a
year earlier. Adjusted for special items, profit was $1.58 a
share, better than the $1.51 expected by analysts
Revenue at US Air rose about 3 percent to $3.9 billion as
planes were fuller. Operating expenses rose 1 percent, with fuel
costs down 3.8 percent and salary expenses up 4 percent.
Shares of Delta were up 2 percent at $20.86, above their
year high of $20.70, while US Airways rose 3.3 percent to