United, Delta Profits Add to 3rd-Quarter Lift in Airline Industry : Carriers: Economizing efforts get credit for gains during the busiest travel season. Executives warn of a need to keep costs down.
The skies finally seem to have turned friendly--and more profitable--for the nation’s airlines.
United and Delta on Thursday joined other major airlines in reporting better-than-expected financial results for the third quarter, after three years of disastrous losses.
American, America West, Northwest and Southwest are among the other major airlines that earlier reported profits in the third quarter, usually the most lucrative time of year for the carriers.
Airline executives and industry analysts warned, however, that major carriers in particular are still far from full recovery.
“This doesn’t show the industry has turned itself around and become healthy,” said David Ulmer, vice president of Roberts & Associates, a transportation consulting firm based in Hayward, Calif. Major carriers must continue to reduce their costs to ensure long-term profits, he said.
In fact, both UAL Corp.--United’s parent company--and Delta Air Lines attributed the improved results primarily to cost-cutting efforts, which have included layoffs, cancellation of unprofitable routes and orders for new planes and the retirement of some older ones. The absence of a half-off fare war this summer also helped the carriers’ revenues during the peak air travel season.
On the New York Stock Exchange, UAL shares rose $6 Thursday to close at $152.75, and Delta rose $1, to $58.25 a share.
Chicago-based United, the nation’s largest carrier, reported a profit of $149 million for the three months ended Sept. 30. Last year, United earned $6 million during the same period.
United’s profit would have been higher had it not written off nearly $60 million to retire 15 wide-body aircraft and $44 million related to pension costs.
Even with the third-quarter profit, United said it expects to report a loss for the current, fourth quarter and for the year as a whole.
“Our improvement over last year’s third quarter is principally attributable to our stringent program of cost control, as well as generally stronger revenue performance on our longer-haul routes,” said United Chairman Stephen M. Wolf in a statement.
“Our shorter-haul operations, however, where we face increasingly intense competition, produced a loss and continue to negatively impact our overall results.”
United reportedly is negotiating with its labor unions to form a new carrier that could compete more effectively with low-fare rivals such as Southwest Airlines.
Delta, the nation’s third-largest carrier, posted a profit of $60.35 million for the third quarter, compared to a loss of $125.2 million a year earlier. The fourth quarter, however, does not look as promising for Delta, which said it would write off $100 million to cover the cost of an early retirement program for about 1,400 workers.
“The profit we reported today is heartening because it shows we’re on the right track, but it is inadequate by almost any other standard,” Ronald W. Allen, Delta’s chairman, said in a statement.
