Airline stocks were mixed Thursday, after industry revenue data failed to meet Wall Street's expectations and indicated the tough pricing environment extended through October.
Wall Street analysts noted unit revenue at eight major network airlines fell 2.9% in October from a year before. The figure, from the Air Transport Association, an industry group, contrasted with better-than-expected unit revenue reported earlier this month by
, the only U.S. airline that provides revenue data along with monthly traffic numbers. Continental's report that October mainline unit revenue rose between 0.5% and 1.5% stoked optimism that industry trends were improving.
"The results came in at the low end of our expected range of a 2% to 3% decline," wrote Michael Linenberg, a Merrill Lynch analyst. "Additionally, we believe our ... forecast was one of the more conservative estimates on the Street." (Merrill Lynch does and seeks to do business with companies covered in its research reports.)
On the domestic front, U.S. carriers face a glut of capacity and tough competition from aggressive low-cost carriers like
. This has made it difficult to raise fares even though fuel costs skyrocketed this year.
The Amex Airline Index was up 0.4%. Shares of American Airlines parent
were up 12 cents, or 1.3%, at $9.44; Continental was up 12 cents, or 1.1%, at $11.30;
Delta Air Lines
fell 9 cents, or 1.3%, to $6.92; JetBlue fell 8 cents, or 0.3%, to $23.21;
rose 3 cents, or 0.3%, to $10.03; and Southwest rose 17 cents, or 1.1%, to $15.77.
Analysts attributed the overall 2.9% year-over-year decline to weakness on U.S. flights. Domestic unit revenues, measured in revenue per available seat mile, or RASM, fell 6.6%, even though carriers filled more of the seats on their planes.
"Given an increasingly steep booking curve, we would have expected early October fare increases to translate into improved October revenue," wrote Jamie Baker, a J.P. Morgan analyst, in a research note. "We were mistaken. We believe all reporting carriers witnessed significant yield declines in October. However, based on carrier feedback we remain optimistic that November results will show evidence of improved pricing traction." (J.P. Morgan does and seeks to do business with companies covered in its research reports.)
One bright spot in the monthly numbers came from international flights. Unit revenues rose 11.5% on Pacific flights and 8.4% on Atlantic flights compared with a year earlier. U.S. network carriers have been moving to increase international flights, where price competition is less severe.
Merrill Lynch's Linenberg expects domestic load factors, which measure the percentage of plane seats filled, to remain strong heading into the holiday season. "However, we are not likely to see any yield recovery given the amount of capacity in the marketplace -- particularly up and down the east coast. On the other hand, we do expect international markets to continue to see strong revenue performance."