American, Delta and United Shares Rise Sharply

CHARLOTTE (TheStreet) -- Airline shares were surging Thursday because of strong December traffic results, even though the results benefited from unit revenue gains related to weather cancellations and the timing of the Thanksgiving holiday, and from favorable guidance from United (UAL).

In late morning trading, United shares were up 11%, American (AAL) shares were up 5% and Delta (DAL)was up 4%. United was gaining $4.35 to $45.36, while American was up $1.48 to $29.10 and Delta was up $1.12 to $30.92.

In its first traffic report following a merger with US Airways, American said December passenger revenue per available seat mile on pre-merger American rose 9% from the same month a year earlier on a capacity increase of 1.1%. PRASM on US Airways routes rose 12% on a capacity increase of 3.6%.

On Wednesday, United said its December PRASM rose between 11.5% and 12.5%, "greater than originally expected due to strong yields and traffic throughout the month." United noted that winter storms added about 2.5 points to its PRASM gain. Cancellations increased the passenger revenues on the flights that flew, and also United had a positive revenue impact from certain interline tickets.

On Wednesday, United issued fourth-quarter guidance that according to JP Morgan analyst Jamie Baker "paints a significantly better-than-expected outcome, affording the first tangible evidence of an improving margin deficit to the industry."

Baker said he now sees a fourth-quarter profit of 75 cents, compared to the consensus estimate of 4 cents. He said fourth-quarter cost per available seat mile was in line with previous guidance despite the bad weather. "We expect additional potential near-term upside on the heels of tonight's disclosure," Baker wrote late Wednesday.

As for Delta, it reported Jan. 3 that its December PRASM rose 10%, "driven by continuing strong demand and benefits from the timing of the Thanksgiving holiday" which included more December flying in 2013 than in 2012.

In response, S&P Capital IQ analyst Jim Corridore boosted his rating to strong buy from buy. He moved his target price to $40 from $30. "We think DAL is likely to maintain a revenue premium to peers," Corridore wrote, in a note. "Its December unit revenue growth of 10% was aided by a shift in Thanksgiving travel into December, but was well ahead of our expectations. We see DAL as best in class among U.S. airlines."

Another Delta booster is Jim Cramer. He said Friday that Delta is his favorite among the top five 2013 S&P 500 stocks. "This company is benefitting from the fantastically positive acquisition of American Airlines by U.S. Airways," Cramer said. "The airlines, in just a couple of years, have gone from being totally uninvestable money-losers to being among the best stocks out there. Even though Delta rose 131% in 2013, the stock can still fly higher.

"I prefer the new American Airlines because of the synergies from the merger, and I think the integration will go smoothly," he said. "But Delta has transformed itself from being an indentured servant to the bond market to being a cash spewer, and I think that the stock's got a lot of room left to run."

Written by Ted Reed in Charlotte, N.C.

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