Airline Profits Top, Outlooks Less Upbeat

Investor's Business Daily

United Continental (UAL) earnings took flight, but shares lost altitude Thursday on weak forecasts for capacity and revenue per customer in 2014.

Southwest Airlines (LUV) and Alaska Air Group (ALK) also reported strong fourth-quarter results but their shares fell too on a bad day for the general market.

Like many of their peers, all three airline stocks have hit record or multiyear highs this week on bullishness about traffic and fuel costs.

United earned 78 cents a share, swinging from a year-earlier 58-cent loss. Analysts polled by Thomson Reuters had expected 65 cents. Revenue rose 7% to $9.33 billion, just above views.

Domestic passenger revenue rose 7% to $3.16 billion. International passenger revenue rose 2.9% to $3.04 billion led by Atlantic routes.

But the airline expects Q1 passenger revenue per available seat mile to be flat to up 2% vs. Q1 2013 and sees consolidated capacity rising 0.3% to 1.3%, below some analysts' expectations.

Revenue per available seat mile rose 3.1% in 2013.

United shares fell nearly 2% to 48.32 but pulled up from an intraday low of 47.

Southwest Eyes Expansion

Discount airline Southwest's Q4 EPS soared to 33 cents vs. 9 cents a year ago, beating estimates by 4 cents. Full-year EPS more than doubled to $1.12. Q4 revenue rose 6% to $4.4 billion, above estimates for $4.3 billion.

The carrier also controlled costs by adding more seats to planes and cutting unprofitable routes. But it plans to expand into certain regions and bid for American Airlines' (AAL) takeoff and landing slots at Washington, D.C.'s Reagan National Airport. Last year, it bought slots at LaGuardia in New York.

Southwest has also been taking older Boeing (BA) 737s out of service to cut maintenance costs.

After briefly hitting a 12-year high, shares retreated to close down 2%.

Alaska Air's Q4 EPS climbed 57% to $1.10, beating views by 3 cents, as fuel costs fell 5%. Revenue rose nearly 7% to $1.21 billion, edging past views for $1.20 billion.

Load factor — the share of seats filled — narrowed to 84.4% from 85.4% a year earlier.

The airline expects capacity to rise 5.5% in 2014.

Alaska shares also fell, but pared losses to less than 1% from Wednesday's all-time best.

Delta Air Lines (DAL), which reported strong earnings on Monday, dipped 1% after rising nearly 6% in the prior two sessions.

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