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Delta, US Airways Report Rare Profit

CHARLOTTE, N.C. ( TheStreet) -- Delta (DAL - Get Report) and US Airways (LCC) both reported rare first-quarter profit, a sign that the airline industry may have found the formula for consistent financial performance.

Historically, airlines lose money in the first quarter, a slow travel season. But this year, among the major carriers only United (UAL - Get Report) is expected to report a first quarter loss.

"A key benefit from a consolidated industry is that we now see a much stronger correlation between revenue and fuel," said Delta President Ed Bastian, in a prepared statement. "So while we are seeing some revenue softness, we are also benefiting from lower fuel costs, allowing us to continue our path of margin expansion even in a sluggish economic environment."

US Airways said first-quarter net income excluding items was a first-quarter record $55 million, or 31 cents a share. Analysts surveyed by Thomson Reuters had estimated 28 cents. In the same quarter a year earlier, excluding items, the carrier lost $22 million, or 13 cents a share. Revenue rose 3.5% to $3.4 billion, in line with estimates.

Including items, the carrier reported a net profit of $44 million, or 26 cents a share, compared with $48 million, or 28 cents, a year earlier.

The carrier credited "a strong demand environment and record passenger load factors" for its strong results. Revenue per available seat mile rose 2.2% to a record 15.78 cents, as consolidated capacity rose 1.3%. On the cost side, mainline cost per available seat mile excluding fuel and special items rose 0.7% to 8.77 cents. Including fuel and items, mainline CASM was 13.82 cents.

The carrier said its pending merger with American (AAMRQ.PK) is expected to close in the third quarter.

Delta said its net profit was $85 million, or 10 cents a share. Analysts had estimated 6 cents. Revenue rose 1% to $8.5 billion, in line with estimates. Including $78 million in special items, net income was $7 million, or 1 cent a share.

"Our results represent Delta's strongest March quarter financial and operational performance in over a decade," said CEO Richard Anderson in a prepared statement.

Passenger revenue per available seat mile rose 4.1%, led by an 8.1% gain in the trans-Atlantic and a 4.9% domestic gain. Mainline unit revenue gained 5.5% while regional unit revenue gained 1.8%. On the cost side, cost per available seat mile excluding fuel and special items rose 5%, driven by the impact of capacity reductions, wage increases and operational and service investments. Fuel expense for the quarter declined by $78 million.

Delta said it anticipates that April unit revenue will decline. "We are taking actions to mitigate the decline in close-in demand we saw in the last part of March, and we expect the impact of the sequester, combined with a softening of leisure demand, to result in a 2% -3% percent decline in April's unit revenues," Bastian said.

In the second quarter, Delta estimates an operating margin between 9% and 11%.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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