After seven fare increases this year, the nation's largest airlines may finally be seeing results in their revenue figures — and Wall...
DALLAS — After seven fare increases this year, the nation’s largest airlines may finally be seeing results in their revenue figures — and Wall Street is applauding.
A bullish May revenue report from Continental Airlines released late Wednesday and solid passenger-traffic figures from American Airlines boosted airline shares this week.
Continental shares shot up $1.10 — more than 8 percent — to $14.67 on Thursday. That was a 52-week high. Yesterday, they dipped 17 cents to $14.50.
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Shares of American rose 21 cents to $13.93 yesterday, up $1.13 for the week.
Analysts warmed to the notion that some traditional carriers will show profits this quarter despite high oil prices.
Continental said its revenue rose between 9 percent and 10 percent compared to last year, nearly double what some analysts had forecast.
“The statistics are obviously impressive,” wrote analyst Gary Chase of Lehman Bros., in a note to investors Thursday. “We highly doubt Continental is alone in experiencing solid revenue gains.”
As the industry’s only monthly unit-revenue estimate, Continental’s figures are anticipated because analysts say they serve as a proxy for how other carriers performed.
The better-than-expected revenue figures reflect consumers still snapping up seats despite price increases that have bumped fares more than $70 round-trip in some cases. Travel experts say airfares for summer travel are very high, owing to strong demand and some large carriers flying less domestically than last year.
“The recent air-ticket-price increases appear to be finally turning around the weak yield and pricing trends in the industry,” said analyst Ray Neidl of Calyon Securities, in a research note.
Continental said that the revenue gains resulted from managing its prices more effectively and from strong demand. Despite higher fares, its planes were 5.1 percentage points fuller than in May 2004.
Several analysts upgraded their second-quarter earnings estimates for Continental, which is now expected to show a modest profit despite higher jet-fuel costs than it had predicted for the quarter.
A profit may not be in the cards for American, but strong traffic figures suggest it’s getting better results than last year. American will lose about $82 million in the second quarter, analysts estimate.
American’s May traffic jumped 10 percent overall from a year earlier as strong international demand continued to drive results at the world’s largest airline.
Despite the higher fares, American’s load factors — a measure of paying passengers on board — rose 5 percentage points over last May to 78.1 percent.
International traffic, measured in revenue passenger miles (each equals a person flown one mile) rose 15.7 percent over last May. American demonstrated particular strength in its Pacific region, where traffic surged 17.4 percent.
American flew a schedule 3 percent larger than last May, but some of that flying — measured in seat-miles flown — came from having more seats on its planes. The carrier is gradually replacing a portion of the seats it removed in 2001 to boost revenue at low costs.
Despite the upbeat developments, the industry remains on course to lose more than $5 billion this year.
Airlines probably won’t turn a net profit for 2006 with prices for crude oil at their current level, closing yesterday at $55.03, up $1.40, on the New York Mercantile Exchange.
Airline shares are likely to rally in coming weeks, analyst Neidl said in his note, but the carriers’ fundamentals remain weak in a market burdened by too much capacity.
Of the major carriers not in bankruptcy protection, only American has enough cash to hold off a liquidity crisis for the time being, he said.
Analyst, Calyon Securities