Three Small Airlines Post Big Results - TheStreet

Three Small Airlines Post Big Results

Shares of America West and ATA soar on news of strong earnings.
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Updated from 11:21 a.m. EDT

While network carriers recover slowly, a trio of smaller, regional airlines posted third-quarter earnings Tuesday that showed big year-over-year increases and easily topped Wall Street estimates.

America West Airlines

(AWA)

reported third-quarter earnings of $32.9 million, or 60 cents a share, topping the 28 cents a share expected by analysts and up from the year-ago loss of $49.6 million, or $1.47 a share. Revenue came in at $592.3 million, up 14% from last year, due in part to the company's new low-price business fares.

"We have successfully transformed our business model into a low-fare, full-service carrier, and the positive results of that transformation are evident in our third-quarter results," said W. Douglas Parker, America West's chief executive.

Likewise,

Alaska Airlines

(ALK) - Get Report

announced earnings of $40.7 million, or $1.52 a share, better than the $1.17 expected by Wall Street and triple the year-ago profit of $12.5 million, or 47 cents a share. Revenue came in at $702.2 million, up 11.6% from the year-ago quarter.

Rounding out the trio was

ATA Holdings

(ATAH)

, a low-cost Indianapolis-based carrier, which announced a third-quarter profit of $7.7 million, or 50 cents a share, beating the 5-cent analyst estimate and topping the year-ago loss of $60.6 million, or $5.18 a share. Revenue came in at $87.7 million, up 22.2% from last year.

Shares of ATA closed the day up $1.40, or 17.5%, at $9.40, while America West jumped $2.15, or 19.3%, to $13.30. Alaska Airlines ended unchanged at $30.90. ATA is currently valued at 9.4 times projected 2004 earnings, while America West is valued at 19 times 2004 earnings. Alaska Air is valued at 33.2 times 2004 earnings.

The seasonally strong summer helped all three stocks post better-than-expected results, but a combination of increased revenue seat miles, known as traffic, and cost cuts helped them outperform. At America West, cost per available seat mile, or CASM, was off 2.1% year over year, while traffic rose 5.2%. ATA saw costs fall 17.8% against a 16% traffic increase while Alaska's costs dropped 2.3% against a 12.3% traffic increase.

In addition to higher traffic and lower costs, the three airlines also saw revenue per available seat mile, or RASM, improve. America West, which has lowered the price of full-fare business class seats, saw this effort pay off in a 14.3% year-over-year increase in RASM. Alaska Air's RASM increased 4.1%, while ATA's grew by 5.7% -- a small signal that a measure of pricing power has returned for the smaller players.

Going forward, ATA said it would be profitable for fiscal 2003, better than the current Wall Street estimate for a loss of $1.05 a share. Similarly, America West said the big third quarter -- along with $81.3 million it received in government aid during the second quarter -- would help it either break even or post a small profit in fiscal 2003. Analysts currently expect America West to post a loss of $1.49 a share for the year.

But not all the comments were positive. Because earnings at Alaska Air tend to peak in the summer, when vacationers flock to the Pacific Northwest, company management warned that it had "considerable work to do to return to profitability on a full-year basis." Elsewhere, ATA management noted that while this quarter's performance was the third-best ever for the carrier, it still needs to shore up its balance sheet.