UAL, AMR top forecasts
Jet fuel hike not as bad as thought, but US Airways' loss bigger than expected
NEW YORK (CNNfn) - The owners of the nation's two largest airlines posted a better-than-expected fourth quarter Wednesday, but the most troubled major U.S. carrier, US Airways Group Inc., had a bigger-than-expected loss.|
A steep hike in fuel prices and a drop in passengers over the New Year's holiday due to Y2K concerns plagued the industry in the most recent quarter. Even the carriers that did better than expected had lower earnings than a year ago.
An exception was UAL Corp., parent of United Airlines, the world's largest carrier. UAL earnings rose due to a strong rebound in Asian traffic, relatively good control of fuel and other costs, and comparatively weak results a year ago.
Earnings of AMR Corp., parent of No. 2 American Airlines, fell sharply but still exceeded earnings per share estimates by 13 percent.
With five of the nation's seven largest carriers reporting, it is clear analysts were overly pessimistic about the quarter, underestimating results for four of them. In addition to UAL and AMR, the nation's third-largest carrier, Delta Air Lines, and fifth-largest Continental Airlines, both reported smaller-than-expected declines in fourth-quarter results Tuesday.
Analysts don't appear likely to turn bullish on the sector until fuel prices abate, though, ING Barings analyst Ray Neidl said. "I think the street overreacted to fuel costs and Y2K," Neidl said. "But this is not to say that estimates won't come down for the first quarter. Fuel prices are even higher now and it's very difficult in short term for carriers to control that cost."
United hurt less by fuel hikes
Chicago-based UAL (UAL) said earnings from operations rose to $230 million, or $1.91 a diluted share, from $189 million, or $1.52 a share, a year earlier. Analysts surveyed by First Call had forecast $1.75 a share.
The results exclude a $17 million charge to write down a 747 aircraft and a gain from the sale of part of its stakes in computer reservation systems. With the items, UAL earned $259 million, or $2.14 a share, up from $156 million, or $1.25 a share, a year ago.
Revenue for the quarter rose to $4.5 billion from $4.3 billion.
Fuel costs in the quarter rose 12 percent from a year earlier, less than those for competing air carriers other than Delta Air Lines, where fuel costs rose only 9 percent. United said long-term fuel contracts leave it well positioned for the current quarter.
For 1999, UAL had income before special items of $1.23 billion, or $10.06 a share, down from $1.34 billion, or $10.50 a share, in 1998. Net income was $1.24 billion, or $13.71 a share, up from $821 million, or $10.24, in 1998.
Revenue for the year was up 2.6 percent to $17.97 billion.
American hit by fuel, Y2K slump
Dallas-based AMR (AMR) posted fourth-quarter earnings from operations of $105 million, or 69 cents a diluted share, down 37 percent from $167 million, or $1 a share, a year earlier. But analysts surveyed by First Call had expected earnings of only 61 cents a share in the quarter.
The AMR results include operations of Sabre, the computer reservation and travel service that AMR announced plans to spin-off last month. But they exclude a gain of $172 million from sales of stakes in other companies, a $25 million charge for litigation, and an increase of $28 million in passenger revenue resulting from a change in estimate.
Including those special items, net income totaled $280 million, or $1.84 a share, up 54 percent from $182 million, or $1.09 a diluted share, a year earlier.
Revenue for the quarter was $4.5 billion, up from $4.2 billion a year earlier. American's passenger revenue rose 8.1 percent, while its commuter carrier, American Eagle, saw a 21.7 percent gain in revenue.
The company's fuel costs increased 24 percent in the quarter.
"While we continue to be concerned about the price of fuel, we are encouraged by the strength of the U.S. economy and more favorable recent trends in industry capacity," Donald Carty, AMR's chairman and CEO, said.
For the year, AMR's net income fell to $985 million, or $6.26 a share, from $1.3 billion, or $7.78 a share, in 1998. The carrier was hit by a pilots' sickout in February that hurt 1999 results.
Annual revenue at the carrier was basically flat at $14.7 billion for the year.
US Airways loss worse than expected
US Airways (U) posted a loss of $47 million, or 68 cents a share, excluding special items. Analysts surveyed by First Call had expected a loss of 61 cents a share. A year earlier, the company had net income $104 million, or $1.18 a share.
Unusual items included a $64 million charge for retiring aircraft, a gain of $7.3 million from sale of its holdings in an industry-owned data communications system, and a $3 million credit from an adjustment to a previous charge. Including those items, its net loss was $81 million, or $1.16 a diluted share.
Revenue for the quarter was basically flat at $2.13 billion, up $14 million from a year ago. The company said operations were hurt by learning impact of a new computer system, crew shortages due to training needs, and aircraft coming out of maintenance slower than expected.
The company also was hurt worse than some competitors by fuel costs, which rose 60 percent in the quarter.
"If there's a bright light for the company, I'm sure management will try to be turning it on, but I don't see it," Neidl said.
For the year, US Airways earned $37 million, or 50 cents a share, excluding unusual items. In addition to the fourth-quarter items, they included a $274 million second-quarter gain from the sale of a stake in a computer reservation system.
With the one-time items, the company posted net income for the year of $197 million, or $2.64 a diluted share. In 1998, net income was $538 million, or $5.60 a share. Revenue for the year fell 1.1 percent to $8.6 billion.
Despite the bad news, US Airways stock was up 2.5 percent in afternoon trading, rising 5/8 to 25-3/4. AMR's stock was up 1/16 to 59-15/16, and UAL's stock was down 5/16 to 61-3/8.