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WRAPUP 1-Delta, US Airways post profits, cite improving demand
July 24, 2013 / 7:06 PM / 4 years ago

WRAPUP 1-Delta, US Airways post profits, cite improving demand

* 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 (Reuters) - 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 restore profitability.

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.

BETTER OUTLOOK

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. carriers.

“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 maintenance contracts.

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 $18.65.

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