By Karen Jacobs
April 23 Delta Air Lines and US Airways
Group, aided by revenue gains, posted
higher-than-expected first-quarter earnings on Tuesday, and
their shares rose despite cautions by both carriers about
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 and form the world's biggest
carrier, said its bookings were higher year-over-year for May
and the summer, but added that business demand has been
pressured since spending cuts known as "sequestration" began.
Investors shrugged off the revenue concerns. Delta shares
were 9.9 percent higher and those of US Airways were up 4.8
percent, both in late afternoon trading.
"We're seeing the impacts of consolidation, overall capacity
discipline and better operational management showing up in 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 from 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 furloughs 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. Airlines have forecast hundreds of millions of dollars in
lost revenue from the furloughs, imposed by the Federal Aviation
"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
tied to the sequester. It also said the weaker yen had hurt
results, and added it was considering possible flight reductions
in the Pacific region as a result.
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
its near-term revenue weakness.
"We anticipate the lower fuel costs, combined with prudent
capacity management, will more than offset any revenue
softness," Chief Executive Richard Anderson said during a
Delta's posted a net income of $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 reported 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 estimate of 28 cents.
Delta's revenue rose 1 percent to $8.5 billion, while US
Airways Group's climbed 3.5 percent to $3.4 billion.