Southwest Airlines Co. (LUV) and Alaska Air Group Inc. (ALK) on Thursday reported better than expected results for the fourth quarter, helped mainly by improved passenger traffic and lower fuel costs.
However, United Continental Holdings Inc. (UAL) reported a decline in profit for the fourth quarter on one-time items, including loss from fuel hedges as well as severance and benefit costs. But the company issued an upbeat outlook for the first quarter, partly due to lower fuel costs.
Dallas, Texas-based Southwest's net income for the fourth quarter declined to $190 million or $0.28 per share from $212 million or $0.30 per share in the year-ago period. The latest quarter's results included $214 million of unfavorable special items.
However, adjusted earnings for the quarter were $404 million or $0.59 per share, compared to $236 million or $0.33 per share in the same period last year. On average, 18 analysts polled by Thomson Reuters expected earnings of $0.55 per share for the quarter. Analysts' estimates typically exclude special items.
Total operating revenues grew 4.5 percent to $4.63 billion from $4.43 billion in the previous-year quarter. Analysts expected revenue of $4.59 billion for the quarter.
Southwest's traffic, measured in revenue passenger miles or RPMs, increased 4.3 percent to 26.77 billion. Capacity, measured in available seat miles or ASMs, rose 2.4 percent to 32.65 billion from last year. Load factor improved 1.6 percentage points from last year to 82 percent.
The company's passenger revenue per available seat mile or PRASM, usually referred as 'unit revenue' rose 2 percent from last year. Excluding special items, unit costs or CASM for the quarter declined 3.8 percent, primarily due to significantly lower fuel prices.
Based on current capacity plans and cost trends, the company expects its first-quarter unit costs, excluding fuel and oil expense, profit sharing and special items, to decrease in the one to two percent range, compared with 8.50 cents in the year-ago period.
Southwest projects first-quarter passenger revenues to grow in line with the expected six percent increase in available seat miles in the quarter, both on a year-over-year basis.
Excluding fuel and oil expense, special items, and profit sharing, the company expects fiscal 2015 unit costs also to decline in the one to two percent range.
Chicago, Illinois-based United Continental's net income for the fourth quarter declined to $28 million or $0.07 per share from $140 million or $0.39 per share in the same period last year.
The latest quarter's results comprise special items of $433 million, including mark-to-market loss from fuel hedges of $225 million and severance and benefit costs of $141 million.
Excluding $433 million of special items, adjusted earnings for the quarter were $461 million or $1.20 per share, compared to $248 million or $0.65 per share in the year-ago period. Analysts expected earnings of $1.22 per share for the quarter.
Total operating revenues for the quarter edged down 0.2 percent to $9.31 billion from $9.33 billion a year ago and matched analysts' consensus of $9.31 billion.
The airline's total operating expenses declined 4.5 percent to $8.69 billion from $9.09 billion last year. United's traffic for the quarter increased 0.1 percent and capacity improved 0.9 percent, while load factor declined 0.7 percentage points to 81.7 percent.
Consolidated PRASM for the quarter increased 0.4 percent. Consolidated costs per available seat mile or CASM, including special charges, declined 5.3 percent in the quarter from last year.
Looking ahead to the first quarter, United Continental forecast pre-tax margin to be between 5 percent and 7 percent, excluding special items.
For fiscal 2015, United Airlines expects consolidated unit costs or CASM, excluding fuel and third-party business expense, to be approximately flat.
Seattle, Washington-based Alaska Air Group's fourth-quarter net income rose to $148 million or $1.11 per share from $78 million or $0.56 per share in the year-ago period.
The latest quarter's results include mark-to-market fuel hedge gains of $4 million after tax, or $0.03 per share, in addition to a benefit related to the curtailment of certain post-retirement benefit plans and a one-time gain associated with the settlement of a legal matter, totaling $0.14 per share.
Excluding items, adjusted net income for the quarter was $125 million or $0.94 per share, compared to $77 million or $0.55 per share in the prior-year period.
Total operating revenues for the quarter rose 8 percent to $1.31 billion from $1.21 billion in the same period last year.
Analysts expected the company to earn $0.93 per share for the quarter on revenues of $1.30 billion.
Operating expenses for the quarter declined 1 percent to $1.06 billion.
Alaska Air's traffic for the quarter rose 9.5 percent, while capacity increased 10.6 percent. Load factor declined 1 percentage point to 83.4 percent. The company's PRASM declined 2.4 percent, while CASM, excluding fuel and special items also decreased 2.4 percent.
The company's board of directors declared a $0.20 per share dividend, up 60 percent from the prior quarter. The dividend will be paid on March 10, to shareholders of record as of February 24, 2015.
LUV is adding $1.82 or 4.35 percent to $43.65, UAL is adding $2.09 or 3.02 percent to $71.30 and ALK is adding $2.27 or 3.49 percent to $67.25.
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