Allegis Posts 1st-Quarter Profit in Turnaround : Sale of Westin Hotels Unit, Improved Performance by United Airlines Cited
Allegis Corp., parent of United Airlines, Thursday reported earnings of $27.9 million from continuing operations in the first quarter of 1988, contrasted with a loss of $54.5 million in the same period a year ago.
Largely because of Allegis’ sale of its Westin Hotels & Resorts subsidiary, the corporation’s overall net earnings rose to $576.9 million in the first quarter from a loss of $30.5 million in the 1987 quarter. The net earnings included a gain of $548.9 million on the sale.
The improved earnings from continuing operations were predominantly the result of United Airlines’ improved performance, which “was driven primarily by strong revenue, as both traffic and yield were up over the previous year,” said Stephen M. Wolf, Allegis’ chairman, president and chief executive. He said this was particularly true in the Pacific.
However, he added: “We are disappointed with our cost performance. This is an area that requires significant attention in the months ahead.” He said operating expenses were $2 billion during the quarter, up 10%. He blamed higher fuel costs and higher travel agent commission expenses.
Analysts said the 1988 first-quarter showings of most airlines exceeded expectations for several reasons. For one thing, there was a surge of traffic in March because of the expiration of the qualifying period for frequent-flier triple mileage. In addition, the relatively early Easter this year meant that holiday-related traffic fell in March rather than April.
The company said operating revenues rose 13% to $2.1 billion in the first quarter of this year. Revenue passenger miles (the number of paying passengers multiplied by the number of miles flown) rose 3% and yield (the average amount of revenue received for carrying one passenger one mile) increased by 11% to 10.8 cents.
Wolf, 46, former chairman of Tiger International, a Los Angeles-based cargo airline, joined Allegis last year as its chairman, president and chief executive and as president and chief executive of the United Airlines subsidiary. On Thursday, the Allegis board also elected him chairman of the airline, replacing James J. Hartigan, who had announced his retirement.
Meanwhile, Delta Airlines said it had record earnings for any March quarter in the first three months of 1988. Operating income also reached records for the third quarter of Delta’s fiscal year. Delta’s net after-tax income in the first three months of this year was $56.1 million, a 113% rise over the same period last year. Operating income rose 62% to $93 million.
Robert Oppenlander, vice chairman and chief financial officer, said good economic conditions, Delta’s growing route system and the benefits of the acquisition of Western Airlines all contributed.
