US Airways 4Q income falls as fuel prices climb

AP News
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Posted: Jan 25, 2012 2:29 PM
US Airways 4Q income falls as fuel prices climb

US Airways Group Inc. expects ticket prices and passenger demand will continue their upward climb this year, overshadowing stubbornly higher fuel prices.

It's just the continuation of a "transformation" to a more stable industry where fare sales are less common, tickets are more expensive and rapid addition of flights is rare, says CEO Doug Parker.

Investors applauded the comments Wednesday and brushed off a decline in the company's fourth-quarter earnings. The earnings still topped Wall Street expectations and its stock jumped more than 20 percent in afternoon trading.

The airline also confirmed that it hired advisers to study a possible combination with American Airlines. Though Parker, a long proponent of industry consolidation, said it will likely be some time before any decision is made on a potential tie-up.

American's parent AMR Corp. filed for bankruptcy protection in November. In bankruptcy, AMR could shed billions in debt, reduce its costs and still afford new planes _ a combination that has drawn plenty of attention. Rival carrier Delta and a private equity firm are also reportedly studying a bid.

A big fuel bill lowered US Airways' earnings by 35 percent in the final three months of 2011.

The Tempe, Ariz., company reported net income of $18 million, or 11 cents per share, in the fourth quarter. That compares with $28 million, or 17 cents per share, a year earlier. Excluding charges, it earned 13 cents per share. Analysts surveyed by FactSet had expected earnings of 2 cents per share and typically exclude one-time items from their estimates.

Revenue climbed 9 percent to $3.16 billion. The money the airline made to fly a passenger one mile in the fourth-quarter rose 10 percent to a record 15.2 cents, as it raised fares to offset a $232 million increase in fuel costs. Ticket prices rose much faster than demand did. Traffic in the fourth quarter, which includes the critical holiday season, rose 1.7 percent. US Airways expects passenger demand to remain strong. Analysts had expected revenue of $3.15 billion.

US Airways said demand was strong from both leisure and business travelers.

"We simply do not see any evidence of macroeconomic weakness in our business," President Scott Kirby said in a conference call.

Its shares rose $1.43, or 22.3 percent, to $7.84 in afternoon trading.

For all of 2011, US Airways earned $71 million, or 44 cents per share, sharply lower than the $502 million, or $2.61 per share, it made in 2010. US Airways said if fuel had stayed the same as in 2010, it would have saved $1.2 billion.

Delta Air Lines Inc. said Wednesday its net income soared to $425 million in the fourth-quarter, as it raised ticket prices and reduced flying to keep costs low. Southwest Airlines Co. reported higher net income last week. It overcame a steep run-up in fuel prices by raising fares and flying fuller planes in the fourth quarter.

Both airlines saw gains from their bets on the price of fuel. Airlines can lock in the price of fuel through elaborate contracts, called hedges. They can pay off when fuel prices are climbing, protecting them from huge losses. US Airways doesn't currently hedge against fuel costs.