Some of the world's biggest airlines report fourth-quarter results over the next two days, and analysts will be looking to see how well travel demand is holding up. Delta Air Lines Inc. and US Airways Group Inc. report Wednesday morning, and United Continental Holdings Inc. reports results Thursday morning.
WHAT TO WATCH FOR: Investors have gotten their best indication about demand so far from Southwest Airlines. Last week CEO Gary C. Kelly said demand has been "very steady, very stable, very strong" and that has continued into this month. That's good news for airline investors. But while Southwest flies more U.S. passengers than any other airline, its focus on domestic travel, and on leisure passengers, make it an uncertain barometer for the rest of the airline business. American Airlines, meanwhile, is in bankruptcy protection and has not released detailed fourth-quarter results.
WHY IT MATTERS: That leaves United Continental, the world's biggest airline company, and Delta, the second-biggest. Those two are true worldwide, business traveler-intensive airlines, so their insight on the state of travel demand will be closely watched. US Airways also has flights to Europe and Latin America but is smaller in scale than United or Delta.
Dahlman Rose analyst Helane Becker said Southwest's earnings were better than expected. She predicted "solid profits" for airlines, although margins will be depressed due to a significant increase in the price of jet fuel. In a note to investors on Monday she said that she's expecting "fairly robust" outlook commentary from airline managers this week. She's looking for airlines to either shrink the amount of flying they do, or at least reduce growth, which in turn would allow them to raise fares.
WHAT'S EXPECTED: Analysts surveyed by FactSet expect Chicago-based United Continental to report a profit of 13 cents per share, with revenue of $8.93 billion. The airline has said it will have about $247 million in one-time charges, including $170 million for integrating United and Continental into one airline.
Atlanta-based Delta is expected to report a profit of 37 cents per share on revenue of $8.32 billion. Analysts expect US Airways, based in Tempe, Ariz., to report a profit of 2 cents per share on revenue of $3.15 billion.
LAST YEAR'S QUARTER: The last quarter of 2010 was United Continental's first as a merged company. It lost $325 million because of merger expenses, although it would have earned $160 million without those expenses. Revenue was up 15 percent to $8.4 billion.
Delta earned $549 million in the last quarter of 2010, a 50-percent jump from the end of 2009. Revenue rose 14 percent to $7.8 billion.
A year ago US Airways earned $28 million. Revenue rose 11 percent to $2.91 billion.
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