America West, AMR and UAL Fly Past Estimates; US Airways Falls Short

Updated from 12:17 p.m. EDT

UAL (UAL Quote), the parent company of the world's biggest carrier, United Airlines, and AMR (AMR Quote), the parent of the the nation's second-largest carrier, American Airlines, on Wednesday reported unexpectedly strong first-quarter earnings as they successfully averted any damage potentially caused by higher oil prices.

But US Airways (U Quote) and America West (AWA Quote) both felt the pinch.

UAL of Chicago said that excluding charges its first-quarter earnings edged up slightly, to $191 million, or $1.61 a diluted share, compared with $187 million, or $1.54 a share, a year earlier. UAL reports on a pro forma, fully distributed basis in order to account for employee stock benefits.

Wall Street had expected UAL to earn $1.37 a share, according to analysts surveyed by First Call/Thomson Financial.

Operating earnings rose 17%, to $384 million, from $328 million in the 1999 first quarter.

"Accelerated revenue strength in the second half of the quarter more than offset the challenge posed by higher fuel prices, resulting in a very good start of the year," James Goodwin, UAL's chairman and chief executive said in a statement.

Fuel prices surged as crude oil rose throughout the quarter, hitting a nine-year high of $34.13 a barrel in early March.

The company also increased its earnings estimate to $8 to $10 a share for 2000, excluding one-time charges, from a previous estimate of $7 to $9 a share.

Shares of UAL rose 2 1/16, or 4%, to 58 13/16 around midday Wednesday. (UAL closed up 1 3/8, or 2%, at 58 1/8.)

AMR of Fort Worth, Texas reported first-quarter net earnings from continuing operations of $89 million, or 57 cents per diluted share, compared with a loss of $2 million, or one-cent per diluted share, in the year-ago period.

Wall Street expected the company to post earnings of 40 cents a share, according to a poll conducted by First Call/Thomson Financial.

Including income from discontinued operations, net earnings were 86 cents a diluted share, compared with 96 cents a diluted share a year ago. Revenues increased 14% to $4.6 billion.

"We established some very positive momentum in the first quarter, posting solid results despite significantly higher fuel prices and soft traffic early in the quarter surrounding the millennium change," Donald Carty, AMR's chairman and chief executive, said in a statement.

"With strong advance bookings and fuel prices receding somewhat, our outlook for the year is improving," added Carty. He also said that the company's fuel-hedging program helped to offset some of the negative impact caused by high fuel prices.

AMR's shares were up 1 13/16, or 5%, at 35 11/16. (AMR closed up 7/16, or 1%, at 34 5/16.)

US Airways, the nation's sixth-largest airline, said, however, that a 105% price increase for jet fuel and the threat of a workers' action that would have caused random flight cancellations weighed on earnings. The airline reached a tentative agreement with the Association of Flight Attendants on March 25, just before the workers were scheduled to begin disrupting operations.

The Arlington, Va.-based carrier, reported a net loss of $115 million, or a loss of $1.72 cents a diluted share, compared with earnings of $46 million, or 56 cents a share, a year earlier. Including the effects of an accounting charge, the net loss was $218 million, or $3.27 a diluted share.

A poll conducted by First Call/Thomson Financial indicated that analysts expected a loss of $1.48 a share.

Operating revenues for the quarter were up 1.3% at $2.1 billion.

Shares of US Airways rose 1 1/2, or 6%, to 27 1/16 around midday. (US Airways closed up 2 1/16, or 8%, at 27 5/8.)

Ray Neidl, an analyst at ING Barings, said US Airways was benefiting from the overall upswing in the airline sector, which has been fueled by an optimistic outlook for the next two quarters. The American Stock Exchange Airline Index was lately up 6, or 5%, at 146.62.

"The market was discounting a poor first quarter due to higher fuel prices," said Neidl, who rates US Airways a hold and has not done any underwriting for the carrier. He added that an increase in traffic, higher prices and falling fuel prices would generate stronger earnings in the second and third quarters.

Phoenix-based America West, meanwhile, reported that earnings per share fell 44% because of a 69% run-up in the average price it paid for jet fuel. The ninth-largest airline in the U.S. reported net income of $14.6 million, or 40 cents a diluted share, compared with $25.9 million, or 63 cents a share, a year earlier.

Nevertheless, America West exceeded Wall Street's earnings expectations of 26 cents a share, based on a First Call/Thomson Financial poll.

America West also faced other operational problems throughout the quarter, including the cancellation of more than 280 flights because of the failure of the airline's automated flight management system. Poor weather conditions also caused cancellations and delays in March.

Shares of America West were up 1 1/8, or 8%, to 15 5/8 around midday. (America West closed up 1/2, or 3%, at 15.)