Airline profits rise in third quarter, but United misses

Thu Oct 24, 2013 2:48pm EDT
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By Karen Jacobs and Nivedita Bhattacharjee

(Reuters) - Southwest Airlines and United Continental Holdings made more money in the third quarter as higher airfares bolstered revenue, capping a strong week of earnings for major U.S. airlines that bodes well for the current period.

United missed estimates on Thursday as it grappled with revenue management shortfalls and competitive pressure, while Southwest's profit was as analysts expected.

Alaska Air Group, a smaller carrier based in Seattle, reported higher-than-expected earnings.

United shares fell as much as 4 percent before recovering. Most other airline stocks moved up, with US Airways Group up 6 percent and American Airlines parent AMR Corp, with which it hopes to merge, up nearly 9 percent in over-the-counter trading.

U.S. airlines have merged, boosted airfares and better aligned their flying with demand to improve results. The industry is on track to post higher profits for 2013 over 2012, analysts said.

"The airlines will have a very good year this year and things are poised to be good in the business environment for next year," said Henry Harteveldt, a travel industry analyst with consulting firm Hudson Crossing LLC. "But the airlines have to deliver what the customers want."

Southwest and United carried fewer passengers in the third quarter but had higher average fares. Delta Air Lines, US Airways and AMR Corp earlier posted profits that topped estimates for the third quarter, a seasonally strong period that includes summer vacation travel.

While the two-week U.S. government shutdown hurt early October revenue, many carriers said travel demand had bounced back. Delta said margins would expand in the current quarter, and Southwest, American and US Airways cited good bookings.   Continued...

A Southwest Airlines passenger aircraft painted with a new NBA logo theme arrives at Love Field airport for a news conference in Dallas, Texas, November 3, 2005.