Northwest Air profit far exceeds expectations
CHICAGO (Reuters) - Northwest Airlines Corp NWA.N on Monday shattered Wall Street expectations, reporting a $244 million quarterly profit on cost cutting and higher fares.
The profit for the No. 5 U.S. airline, which exited bankruptcy in May, matches profits for rivals in the third quarter and bolsters the case for industry recovery despite sky-rocketing fuel prices.
Northwest shares rose following the report and were 3.17 percent higher at $17.90 on the New York Stock Exchange.
"These results are consistent with our five-year business plan, when adjusted for higher fuel prices," Chief Executive Doug Steenland said in a statement.
Northwest said profit was $244 million, or 93 cents per share. It was the first full quarter for Northwest since exiting bankruptcy. Analysts' average forecast was 76 cents a share, according to Reuters Estimates.
A year earlier the airline reported a loss of $1.2 billion, impacted by charges related to its reorganization. The company launched new shares after it emerged from Chapter 11, so an accurate year-ago earnings-per-share comparison is not available.
Excluding special items, Northwest reported a third-quarter profit of $405 million, up from $258 million a year earlier.
The carrier said operating revenue declined 0.9 percent to $3.4 billion. Northwest ended the quarter with $3.1 billion in unrestricted cash.
The airline industry, recovering from a years-long downturn, has been battered by soaring fuel costs and low-fare competition.
Strategic fuel hedging and fare increases have given some stability to the embattled industry. Northwest's fuel costs declined 7.9 percent for the quarter.
Northwest said its operating expenses declined 4 percent to $2.9 billion, while average fares gained 2.1 percent.
Northwest Chief Financial Officer Dave Davis said on a conference call with reporters and analysts that bookings remain strong in the fourth quarter and that there is no evidence of slowing demand.
The carrier said it expects costs per seat mile to rise 2.5 percent to 3.5 percent in the fourth quarter with a reduction in the number of available seats down 2 percent to 3 percent. The airline said the bulk of the capacity reductions will be on domestic routes.
On more lucrative international routs, Northwest said it intends to increase capacity 2 percent to 3 percent.
The airline said it expects to pay $2.40 per gallon of jet fuel in the fourth quarter.
(Reporting by Kyle Peterson, editing by Phil Berlowitz)
