American Airlines (AAL) and Alaska Air Group (ALK) both reported third-quarter results that beat forecasts early Thursday, although American forecast thinner margins for the fourth quarter.
American said its adjusted pretax margin in the fourth quarter would be around 4% to 6%, weaker than in prior quarters this year.
The carrier also said it expected adjusted mainline unit costs to rise 8%-10% during the fourth quarter and 5%-7% for the entire year, in line with guidance given by the company this month. Those higher costs for the year reflect profit-sharing and the company's recent labor deals with a variety of employees.
American said it expected full-year capacity to grow around 1.5%, in line with a forecast given earlier this month.
For the third quarter, unit revenue fell 2.2%, while capacity grew 1.2%.
The drop in unit revenue "was due to competitive capacity growth, continued macroeconomic softness outside of the United States, and foreign currency weakness," American said.
Unit revenue measures revenue as it relates to available seats and distance traveled, while capacity, broadly, measures available seats, flights and distance traveled.
Wall Street has called for airlines to improve unit revenue by raising airfares and reining in flight capacity to align with passenger demand. Investors have focused on airlines' forecasts as to when unit revenue might turn positive and when capacity growth will become more restrained after cheap oil made airlines' expansion easier through last year.
American's earnings per share fell 36% to $1.76, better than expectations for $1.69, on revenue down 1% $10.59 billion, above views for $10.54 billion.
Still, investors showed concern over forecasts, and shares shaved off 4 cents to close at 40.59 on the stock market today.
Meanwhile, Alaska Air Group said it expected fourth-quarter capacity growth of around 3%, far more restrained than in prior quarters. The company sees adjusted unit costs up roughly 0.5% during the fourth quarter.
Unit revenue fell 4.4% during the third quarter. Earnings rose 2% to $2.20 a share, whereas analysts had expected a 3% drop to $2.09. Overall revenue climbed 3% to $1.566 billion, just topping views $1.561 billion.
The company said it was "fully focused" on completing its merger with Virgin America (VA). The Justice Department has lengthened its review of that deal, announced in April, due to competitive concerns. There have been more indications recently that the deal would ultimately be approved.
Shares rose 2.5% to 75.29.
IBD'S TAKE: Low-cost carriers have dragged their bigger airlines into an airfare war in the U.S. and posed greater competition abroad. Delta Air Lines is considering a broad range of options to hold up against budget rivals in Europe.
Delta Air Lines (DAL) and United Airlines (UAL) have already reported Q3 results. Delta was up 1.4% to 41.46 while United climbed 2% to 56.57. JetBlue (JBLU) picked up 2% to 18.60, while Southwest (LUV)ticked up 4 cents to 42.29.
Southwest holds its third-quarter earnings call Wednesday, JetBlue on Tuesday.
RELATED:
Delta Delays Unit-Revenue Target But Vows Tight Capacity Control
United Sees Unit Revenue Improving In Q4 But Labor Pact To Lift Costs
