American, Southwest beat forecasts, JetBlue disappoints

Thu Apr 24, 2014 1:59pm EDT
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(Reuters) - American Airlines Group (AAL.O: Quote) and Southwest Airlines (LUV.N: Quote) posted profits that beat forecasts in the first quarter, even though harsh winter weather prompted many flight cancellations in the seasonally weak period.

JetBlue Airways (JBLU.O: Quote) disappointed as wage increases raised its costs. United Continental Holdings (UAL.N: Quote) posted a wider loss as revenue fell.

All the carriers said revenue in the current period was looking up.

Warmer weather should encourage more leisure travel in the current quarter, airlines said, boosting second-quarter unit revenue, a key measure of pricing power and how full planes are. United said it expects unit revenue to rise 1 percent to 3 percent in the three months ending in June, while American forecast a rise of 4 percent to 6 percent.

Southwest, which benefited from higher fares and lower costs in the first three months of year, said the second quarter was "off to a great start," citing strong April bookings and revenue trends. It forecast a 6 percent to 7 percent rise in unit revenue for April.

"The demand environment is healthy heading into what should be a very strong spring and summer travel season," said Jim Corridore, an equity analyst with S&P Capital IQ.

Share prices reflected the results. American was up 2.2 percent to $37.91 on Thursday and Southwest gained 0.8 percent to $24.27. United sank 9.3 percent to $41.78 and JetBlue was off 2.9 percent to $8.34.

Henry Harteveldt, travel industry analyst and founder with Atmosphere Research Group, said United Continental needed to make improvements. United has been working to win back customers after system changes it made after its 2010 merger hurt customer service.

"It's clear that weather aside, United is not offering a product that travelers like and is losing market share," Harteveldt said. "While United has made some improvements, it's still not strong enough."   Continued...

The tail sections of a newly designed American Airlines aircraft (L), a US Airways aircraft (C) and a traditional American Airlines aircraft are lined up at Dallas-Ft Worth International Airport February 14, 2013. REUTERS/Mike Stone