United, Continental report 3Q profits

AP News
Posted: Oct 21, 2010 5:04 PM
United, Continental report 3Q profits

United and Continental airlines both posted third-quarter profits during their last quarter as independent companies, reversing their losses from a year earlier as they benefited from rising traveler demand and higher fares.

United Airlines had a profit of $387 million, or $1.75 per share. A year earlier it lost $57 million.

Continental Airlines turned a profit of $354 million, or $2.16 per share. A year earlier it lost $18 million.

Chicago-based United Continental Holdings Inc. now runs both airlines and reported the results on Thursday. They were separate companies until Oct. 1, the day after the quarter ended. Eventually they will be combined into a single airline called United. The company will report combined results for the two airlines starting next quarter.

Revenue at United's former parent company rose 21.7 percent to $5.39 billion. Continental revenue rose 19.2 percent to $3.95 billion.

Delta, American, and US Airways all reported quarterly profits on Wednesday. After struggling with high fuel prices in 2008 and a drop in business travel caused by the recession in 2009, conditions are finally right for airline profits. Even as travelers have returned, airlines have added back few additional seats, allowing them to raise fares.

United passengers paid 16.9 percent more for each mile flown during the quarter, compared with a year earlier. So-called yield rose 18.7 percent at Continental.

The biggest jumps were in revenue for overseas flights. Passenger revenue for flights across the Pacific _ where United has an extensive schedule _ rose 43.2 percent to $869 million. Passenger revenue for flights across the Atlantic rose 30.2 percent to $827 million. Domestic passenger revenue was up 7.7 percent to $2.1 billion.

Continental's passenger revenue for flights across the Atlantic rose almost 31 percent to $848 million.

However, the company said that the percentage of seats sold for the next six weeks has fallen 3.1 percentage points for Atlantic flights, and 4.3 percentage points for flights to Latin America. Pacific bookings are up 4.8 percentage points, and domestic bookings on flights operated by United and Continental are up 1.2 percentage points for that six-week period.

The company said it expects fourth-quarter capacity to rise 3 percent to 4 percent. Investors have been closely watching capacity _ measured by the number of seats times the number of miles flown _ because of a consensus that keeping capacity in check will allow airlines to charge more for tickets.

United Continental President and CEO Jeff Smisek said capacity would rise 1 percent to 2 percent next year.

"We will not grow for growth's sake, but only if we can maximize our profitability by doing so," he said on a conference call.

Smisek's aiming to have a single operating certificate from the Federal Aviation Administration for the combined airline by the end of 2011. But they have already begun shifting some planes around. Flights previously flown with 50-seat regional jets at Continental hubs at Newark, N.J., and Cleveland are being upgraded to 70-seat jets that had been operated for United. Regional jets that big aren't allowed under Continental's pilot contract.

Also Thursday, the airline said it would add several new flights from Continental hubs, including Newark-Des Moines, Iowa, and Cleveland-Cincinnati.

United is adding flights from its hub at Washington Dulles to Louisville, Ky., and from the Delta hubs of Minneapolis and Salt Lake City. It is also adding flights between Denver and Love Field in Dallas, where Southwest flies.

Shares of United Continental Holdings rose 17 cents to close at $27.80.