| April 23
April 23 Delta Air Lines and US Airways
Group posted higher-than-expected first quarter earnings
on Tuesday driven by revenue gains and their shares rose despite
cautions by both carriers about near-term weakness.
Delta forecast a positive operating margin for the current
quarter but added that U.S. government spending cuts and lighter
demand from leisure travelers were expected to hurt a key
revenue measure in April.
US Airways, which plans to merge with AMR Corp's
American Airlines this year, said its bookings were higher
year-over-year for May and the summer, but said business demand
has been pressured since spending cuts known as "sequestration"
Investors shrugged off the revenue concerns. Delta shares
rose 8.3 percent and US Airways gained 3.3 percent in afternoon
"We're seeing the impacts of consolidation, overall capacity
discipline and better operational management showing up the form
of improved results," said Fred Lowrance, an airline analyst
with Avondale Partners.
U.S. airlines have merged, curbed unprofitable routes and
raised ticket prices to recover in recent years. Carriers are
also cutting back flying to match demand and have gained new
revenue streams with baggage and food fees, moves that have
helped keep profits coming.
But an uncertain macroeconomic backdrop could pose
challenges for travel over the next few months.
This week, staff cuts at U.S. air traffic control towers
took effect, causing delays at some airports but so far not the
widespread chaos some transport regulators had warned about.
"It's hard to quantify what exactly (sequestration effects)
would be," said Matthew Jacob, an airline analyst with ITG
"Investors are more interested in the profitability
continuing and the strong earnings despite what appears to be
slowing (revenue) trends," Jacob added.
Delta mentioned weaker ticket sales in its defense business,
which accounts for about 3 percent of overall sales, tied to the
sequester. US Airways said its government revenue fell more than
30 percent in March, a result of the budget cuts as well as the
Easter holiday shift into March from April last year.
"Leisure demand is still good," US Airways President Scott
Kirby said during a conference call. "Business demand remains
volatile, however, and as long as the sequester stays in place I
expect the government related demand will continue to be
Delta added it expected declining oil prices to help offset
the near-term revenue weakness.
"While we are seeing some revenue softness, we are also
benefiting from lower fuel costs, allowing us to continue our
path of margin expansion even in a sluggish economic
environment," President Ed Bastian said in a company statement.
Delta's net income was $7 million, or 1 cent a share, for
the first quarter, compared with $124 million, or 15 cents a
share, a year earlier. Excluding items, profit was 10 cents a
share, compared with 6 cents expected by analysts on average,
according to Thomson Reuters I/B/E/S.
US Airways had a first-quarter profit of $44 million, or 26
cents a share, compared with $48 million, or 28 cents a share, a
year earlier. Excluding items, its profit was 31 cents a share,
topping analysts' average forecast of 28 cents.
Delta's revenue rose 1 percent to $8.5 billion, while US
Airway's climbed 3.5 percent to $3.4 billion.