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Airline 1Q profits clouded
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April 22, 1998: 4:35 p.m. ET
TWA, UAL Corp., US Air cite labor costs, Asian crisis for crimped profits
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NEW YORK (CNNfn) - Faced with rising labor costs and a backlash from Asia, several of America's major airlines failed to steer profits to cruising altitude in the first quarter despite lower fuel costs, improved efficiency and a chugging economy.
UAL Corp., the parent company of United Airlines, US Airways, and Trans World Airlines Inc. cited continuing weakness in Asian markets and the effects of a U.S. excise tax on tickets that was not in force for most of the year-ago period, for holding back earnings in the first quarter.
The reports caused the companies' stock to suffer a modest pullback at midday Wednesday. US Airways (U) shares were off 3/4 at 78-3/4, while UAL (UAL) stock eased 1-1/8 points to 90-3/8. TWA (TWA) was trading unchanged at 10-1/2.
UAL's net income fell 42 percent to $61 million, or 34 cents a share, from $105 million, or 92 cents a share the year before. On a fully distributed basis, however, UAL's preferred formula for reporting profits, earnings rose slightly to $218 million, or $1.68 a share, from $215 million, or $1.61 a share a year ago. Wall Street consensus estimates called for earnings of $1.55 a share.
The fully distributed method of reporting per-share results assumes that all the stock of UAL to be paid to employees is outstanding.
Revenues totaled $4.1 billion - virtually flat from the year-ago period.
Trans World Airlines Inc. posted a first- quarter net loss of $55.5 million, an improvement from last year's loss of $71.6 million.
On a per-share basis before extraordinary items, the loss totaled 76 cents, compared with a loss of $1.49 a year ago. That was a penny off analysts' consensus estimate, as measured by First Call, of 75 cents.
Revenues rose to $765.4 million, up slightly from $762.3 million.
US Airways posted net income of $98.3 million, or 96 cents a diluted share, down 35.6 percent from $152.7 million, or $1.45 a diluted share a year ago. The results beat Wall Street forecasts by a penny.
Total revenues declined to $2.06 billion from $2.1 billion. At the same time, seat capacity decreased 5.4 percent in the first quarter. The average passenger trip was 710 miles, a decline of 0.6 percent.
A stronger quarter than expected
Raymond Neidl, an airline analyst with Furman Selz, said the second quarter was turning out to be much stronger than most had expected.
"The economy's been very good to the industry, which has caused profits to go up," Neidl said. "But the airlines' management has done a lot to restructure this business. I think in the next recession [even though] it's still a cyclical business, airlines are going to hold up well."
UAL, the nation's largest airline, said it expected the major trends that affected earnings in the first quarter to continue in the coming year. The company also predicted that capacity increases abroad and the Asian economic situation would continue to have an adverse impact.
Stephen Wolf, US Air's chairman and chief executive officer, said the results pointed up the airline's "underlying strength."
"With such major events as the introduction of MetroJet, our new Airbus aircraft and SABRE technologies yet to come, it's safe to say that 1998 is off to a superb start," Wolf said.
On Monday, Delta Air Lines reported first- quarter earnings of $195 million, or $2.45 a diluted share. That topped analysts' forecasts but was down from year-ago profits of $189 million, or $2.47 a share. Delta blamed a stronger dollar and a decline in domestic and international passengers for the slump. 
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