TWA Underwhelms, UAL Pacific Exposure Hurts, and US Airways Does Okay - TheStreet

TWA Underwhelms, UAL Pacific Exposure Hurts, and US Airways Does Okay

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Three of the Mighty Titans reported today, and the tale of the earnings trail was just a bit different for each. This leaves

Alaska Airlines

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and

Southwest Airlines

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as the only two major carriers that have not yet reported, and they are both scheduled to do so tomorrow.

TWA Posts Improvement over Previous Year

TWA

(TWA)

reported results that were about what the Street had expected. No real surprises here. The carrier reported a net loss of $54.1 million on revenues of $765.4 million. This represented a loss of 76 cents per share, as opposed to a loss of $1.49 per share per share last year. Revenues were fairly flat year over year, but one significant statistic caught our eye. Operating cost per available seat mile was down 5.3% for the carrier. (We'll pull apart the fuel component of that figure and see what percentage of the increased operating profit was due to lower fuel prices on Friday, when we finish our fuel

review of the majors.)

Revenue per available seat mile, also known as unit revenue, was up 1.5%, but yields dropped back a bit, coming in 0.8% lower than the same quarter last year. This is a disappointment, as the carrier has been pushing to increase its percentage of high-yield passengers for the last year. TWA CEO Gerald Gitner admitted in a conference call that while the carrier remained "on track" in terms of internal goals, the revenue mix needed additional work.

You might remember that TWA posted very strong loads in March. My moles tell me that the airline almost had too much traffic on many routes, resulting in a high number of denied boardings. So, yes, looks like the revenue management folks in St. Louis need to work with the holy trinity of airline industry profits just a bit more. You know the holy trinity -- loads, unit revenue and yields. (For a complete explanation of these terms, see the Airlines section in the

TSC Glossary

.)

TWA also announced an aircraft order that had been expected. The airline will lease 24 new MD-83 aircraft from

Boeing

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, with deliveries slated to begin in May 1999. This order is in addition to 10 MD-83s that are already slated for delivery in 1998 and 1999.

The change in the average age of TWA's fleet continues at a pretty rapid clip. As of the end of next year, it will be about 12 1/2 years, a significant improvement over where the carrier was last year, when the average age was 19 years and counting. Newer planes mean more flight hours per day, less maintenance and better fuel efficiencies. Hard to argue with that combination.

UAL Profit Up 1%; Lowered Fuel Prices Help Offset Pacific Losses

UAL Corp.

(UAL) - Get Report

, parent of

United Airlines

, posted a $218 million net profit, or $1.68 per diluted share, compared with $215 million, or $1.61 a share, a year earlier. These results were higher than Street estimates of around $1.55 per share. Operating revenue fell 2%. Margins in the Pacific were down 10% alone -- with pretax profits down $75 million for the region. Bright spot? Revenue passenger mile growth on United's trans-Atlantic flights were up in the "double digits," according to President and COO John Edwardson.

The operating stats tell the tale here. United's revenue passenger miles were down 1.6%, and available seat miles were up 2.3%, which caused load factor to drop 2.68 points for the quarter. But more importantly, RASM, or unit revenue, fell 3.5% year over year, and yields were down 0.2%.

Operating costs per ASM were down 4% -- but again, a big portion of this was due to lowered fuel costs.

US Airways Falls Year Over Year, but Manages to Beat Forecasts

US Airways

(U) - Get Report

reported earnings of 96 cents per diluted share, compared with $1.45 in 1997. The latest analyst earnings forecasts had been calling for results of around 94 cents per share.

Operating profit for the quarter was up 9.4%, but net income was down 35.6% to $98.3 million. Why the death-defying drop? US Airways has used up its income tax credits. The company is now paying an effective rate of 40%, as opposed to 8% for 1997.

On the operating stat side, US Airways was mixed. The carrier reported a 0.2% rise in yields and a 2.4% increase in RASM. But, it also reported a 1.2% increase in operating costs per ASM. And this is a quarter when operating costs should be coming in lower, year over year, because of the lower price of fuel.

Holly Hegeman, based in Dallas, pilots the Wing Tips column for TheStreet.com. At time of publication, she is long Southwest, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stock. You can usually find Holly, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at www.planebusiness.com. Holly welcomes your feedback at

hhegeman@planebusiness.com.