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Airlines' 3Q: rough landing
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October 21, 1998: 1:39 p.m. ET
Carriers turn in weaker results, unable to capitalize on cheap fuel prices
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NEW YORK (CNNfn) - Unable to take advantage of an industry-wide drop in fuel prices and hit by rising operating costs and taxes, the nation's top airlines Wednesday reported third-quarter results that generally disappointed their investors.
Leading the sector's decline were shares of TWA (TWA), which slumped nearly 20 percent, down 1-1/16 at 4-3/8 on the American Stock Exchange.
The St. Louis, Mo.-based carrier, which is in the midst of its planned turnaround program, reported a loss of $923,000, or 11 cents a share, in the third quarter, compared with operating profits of $13.3 million, or 17 cents a share.
The loss was far worse than expectations, which called for profits of 33 cents, according to the consensus estimate compiled by First Call.
Unable to capitalize on lost traffic of strike-plagued Northwest Airlines, TWA's revenue eased 5 percent to $863.2 million.
During a telephone news conference, TWA officials acknowledged the carrier's turnaround plan isn't working to keep unit costs down.
"We have to do more work on the cost side of the equation," Gerald Gitner, TWA chairman and chief executive, told reporters.
Although fuel costs plunged 30 percent, aircraft leasing expenses increased by 31.3 percent and aircraft costs are likely to rise in the fourth quarter, TWA officials confirmed.
"As we go forward, the year-over-year comparisons will continue to show increases," said Michael Polumbo, TWA's chief financial officer.
Separately, TWA said it acquired four Boeing 757-200 aircraft from Boeing Co., allowing it to retire its remaining fleet of less efficient and noisier Boeing 727-200 planes by the end of 1999.
United Airlines
The industry leader, UAL Corp., reported earnings rose to $516 million, or $4.02 a share, on a fully distributed basis. The reporting method assumes the full distribution of United's employee stock ownership plan.
The results topped the operating profits that United Airlines reported in the 1997 third quarter of $3.75 a share. Including a pretax gain of $378 million, net income totaled $734 million, or $5.53 a share, in the year-ago period.
But analysts still were anticipating the Chicago-based carrier to earn $4.07 a share, according to First Call.
In addition, the airline said increased traffic gained due to the Northwest strike contributed 27 cents to 30 cents into earnings. Without that business, earnings would have been about flat compared to the year ago, UAL said.
Revenue rose 3 percent to $4.78 billion from a year earlier but operating expenses rose 2 percent.
UAL's stock (UAL) fell 2-1/2 to 63-7/8 in Wednesday trading on the New York Stock Exchange.
US Airways
Due to a higher tax bracket, US Airways reported net income declined 24 percent in the third quarter to $141.9 million, or $1.51 a share.
The results were ahead of the $1.43-a-share estimate that analysts were expecting. But the Arlington, Va.-based carrier said its corporate tax rate surged to 40.3 percent from 19.3 percent in 1997.
The latest profits also included a gain of $3 million on the sale of two aircraft.
Revenue rose just 2.2 percent to $6.57 billion.
US Airways' shares (U) were down 1-11/16.
American Airlines
AMR Corp., parent of American Airlines, the nation's second-largest airline behind United, served as the brightest spot for the bleak sector, turning in a 34-percent increase in earnings from continuing operations.
In the latest quarter, the Ft. Worth, Texas-based carrier said operating profits rose to $431 million, or $2.48 a share, from $322 million, or $1.78 a share.
Total revenue climbed 7.2 percent to $5.04 billion while operating expenses climbed by 5.2 percent to $4.3 billion.
The stock (AMR) helped keep the sector's losses to a minimum, climbing 7/16 to 58-3/4 on the Big Board. 
-- by staff writer Robert Liu
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