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Airlines' 4Q results bumpy
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January 18, 2001: 2:30 p.m. ET
UAL loss less than expected; Delta misses lowered target; NW sees gains
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NEW YORK (CNNfn) - Higher fuel costs and labor woes in the fourth quarter hit the results of two of the nation's largest airlines, United Airlines and Delta Air Lines, but Northwest, the nation's No. 4 carrier, overcame those problems to post a small gain in operating income.
UAL Corp., the parent of United, the world's largest airline, reported a fourth-quarter loss Thursday, although it managed to beat Wall Street expectations. Delta, posted a 54 percent drop in fourth-quarter earnings, trailing even its lowered estimates, and said it is mulling a merger. And Northwest earnings excluding special items was above both expectations and year earlier results.
UAL loss smaller than expected
Excluding one-time items, UAL lost $124 million, or $2.41 per share, compared with earnings of $100 million, or 59 cents per share, in the year-ago period. First Call consensus estimates predicted a loss of $3.74 a share.
 The Chicago-based airline said labor costs and fuel prices also will result in a loss in the first quarter of 2001, but UAL expects a "modest profit" for the full year. First Call had been forecasting a loss of $2.44 a share in the current period, but a full year profit of $4.17 a share.
The airline is in labor negotiations with the International Association of Machinists, and is charging that the mechanics are grounding planes for unnecessary reasons in order to gain leverage at the bargaining table. The airline gained a temporary restraining order against the union just before the Thanksgiving holidays, but that order has expired.
UAL's planned $4.3 billion purchase of US Airways (U: Research, Estimates) looked more likely to clear regulatory hurdles this month when American Airlines parent AMR Corp. (AMR: Research, Estimates) agreed to buy certain US Airways assets for $1.2 billion.
Last week, the European Commission approved the UAL-US Airways link after United Airlines agreed to give up some slots for transatlantic flights at Frankfurt and Munich airports in Germany.
Shares of UAL (UAL: Research, Estimates) rose $2 cents to $39.88 Thursday.
Delta misses mark, mulls merger
Delta finished the quarter in the black, but was hit by fuel costs and its own labor pains. The Atlanta-based carrier, the nation's third largest, earned $79 million, or 60 cents per share, down from $171 million, or $1.22 a share, a year earlier, missing already reduced First Call expectations by 2 cents. Earlier this month, the Atlanta-based company warned it would earn between 55 and 65 cents per share for the fourth quarter.
It said the refusal of its pilots to fly on overtime reduced profits by about 40 cents a share. Delta depends on overtime flying by pilot to staff about 5 percent of its flights. The Air Line Pilots Association and Delta are in negotiations, and the airline charges the refusal to fly overtime is an illegal job action. But Delta lost an effort to win its own temporary restraining order against the union to force them to fly the flights.
CEO Leo F. Mullin said because Delta expects reduced business travel as the result of a softening economy, the upcoming year will be guided by a "tough-minded cost-control mentality." He said Delta now is mulling whether to follow the industry trend of consolidation or remain independent.
 "Delta of course is carefully considering our next step: whether to participate in consolidation or continue on our current path," Mullin said in a conference call. "Delta has two options. The first is we can remain independent, and if we choose to do so ... we have considerable strength ... or we can participate in consolidation. We will make that choice with long-term shareholder value as the key component of our strategy."
Analysts have said the airline will face difficulty not only competing as the distant third U.S. carrier – if AMR's acquisition of TWA and the UAL/US Airways deal go through – but also will face serious challenges to any large acquisitions it may attempt.
Mullin said the action that would most damage to Delta would be to implement a bad deal.
"Delta's goal has never been to be the world's largest unsuccessful airline," he said.
Shares of Delta (DAL: Research, Estimates) rose $1.25 to $47.63 in early midday trading Thursday.
Northwest beats forecast, year-ago result
Northwest Airlines has had its own labor battles with its mechanics union, and like United it won a restraining order against its union just before Thanksgiving. It was apparently least affected by labor problems of the three major carriers reporting results Thursday.
The Eagan, Minn.-based carrier earned $31 million, or 34 cents a diluted share, excluding special items. That compares to the First Call forecast of 31 cents a share and the $29 million, or 31 cents a share, it earned a year earlier.
Revenue rose 7 percent to $2.7 billion, helping it to overcome a 34 percent increase in fuel costs during the period. The number of miles flown by passengers rose 4.3 percent to 18.5 billion, while the amount paid per mile flown, an indication of average fares, gained 1.4 percent to 12 cents.
"The fourth quarter was challenging," said Mickey Foret, Northwest's chief financial officer. "Our financial performance was negatively impacted by severe weather and labor disruptions, but despite that we experienced strong revenue performance."
The company took some charges in the period related to the write-down of aircraft as well as the repurchase by Continental Airlines of a stake Northwest held in the No. 5 carrier, which it agreed to do to settle an antitrust case with the Justice Department. With those charges the company posted a net loss of $69 million, or 84 cents a share, in the current period.
Despite topping forecasts, shares of Northwest (NWAC: Research, Estimates) still lost $1.19 to $27.75 in trading Thursday. 
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