Airline Profits Buffeted by Hurricane, Higher Costs

UAL Corp. and AMR Corp., operators of the nation’s two largest airlines, said third-quarter profits were hurt as costs rose and Hurricane Floyd forced them to cancel flights.

US Airways Group Inc. had a larger-than-expected loss in the quarter as the storm and operating problems battered its flight schedule. Trans World Airlines Inc. also posted a larger loss than expected as a threatened strike by machinists sent business travelers to other carriers.

United Airlines parent UAL, the No. 1 carrier, said net income declined 12% to $456 million, or $3.75 a share, a penny shy of analyst estimates, as revenue inched up 1.3% to $4.85 billion.

United’s profit was less affected by increasing industry competition than were those of other U.S. carriers, analysts said. United was one of the only airlines that didn’t reduce profit forecasts during the quarter.

Profit at AMR, parent of No. 2 American Airlines, fell 35% to $279 million, or $1.75 a share, but well above the $1.69 a share that analysts expected. Revenue was up 2.1% to $5.15 billion. AMR’s results include the company’s 83% stake in Sabre Holdings Corp., the world’s largest travel reservation company.

Most airlines have seen profits suffer this quarter as the industry grapples with a 40% jump in the average price of jet fuel.

Results at the top two carriers also were being compared with year-ago results that were boosted by a Northwest Airlines Corp. pilots strike.

US Airways lost $85 million, or $1.19 a share, in the quarter, compared with net income of $142 million, or $1.51. Analysts were expecting a much smaller loss of 35 cents. Before the company issued a profit warning in mid-September, analysts were expecting 89 cents. Revenue fell 4.8% to $2.1 billion.

TWA’s loss from operations widened to $36.2 million, or 61 cents a share, a better performance than the 52-cent loss analysts expected, compared with a loss of $923,000, or 11 cents, a year ago. Revenue rose 1.5% to $876.4 million.

At a Glance

Other earnings, excluding one-time gains or charges unless noted, include:

BANKS:

* Chase Manhattan Corp.’s profit jumped 61% to $1.19 billion, or $1.37 a share, well above analyst estimates of $1.32, on fees from advising on mergers and higher trading revenue. Chase, the No. 2 bank behind Bank of America, benefited as capital markets recovered after last year’s Russian debt default. Investment banking fees surged 51% and trading revenue rose more than ninefold. Trading revenue was hurt in the third quarter of last year by the worldwide market plunge following Russia’s default. Operating earnings in the consumer services group grew 30%, led by gains in home finance revenue.

* Republic New York Corp. reported a profit of $126.5 million, or $1.15 a share, in contrast to a loss of $92.7 million, or 96 cents, a year ago, as it benefited from restructuring to focus more on private banking for wealthy customers.

DRUGS:

* Eli Lilly & Co.’s operating earnings rose 15% to $679.7 million, or 62 cents a share, matching estimates, as sales of its newer drugs helped offset a steep 13% drop in sales of its antidepressant Prozac. Prozac, Lilly’s top seller, is feeling the effects of competition from newer antidepressants, and Lilly said annual sales of the drug will drop both this year and next. Prozac made up one-third of Lilly’s 1998 revenue of $9.2 billion. Total revenue grew 10% to $2.59 billion in the quarter. Sales of the new schizophrenia pill Zyprexa grew 27%, and bone-protecting drug Evista’s sales nearly tripled to $92.8 million from $33 million a year ago.

* Schering-Plough Corp. said its third-quarter profit rose 20% to $518 million, or 35 cents a share, matching forecasts, on higher sales of its allergy treatment Claritin as well as drugs for cancer and hepatitis. Sales rose 13% to $2.24 billion.

OTHER INDUSTRIES:

* Avon Products Inc. posted a 10% increase in its third-quarter profit to $88.2 million, or 34 cents a share, and lowered its forecast for next year’s earnings. The direct seller of cosmetics said sales edged up 1.4% to $1.25 billion, with a boost from improved sales in Asia. Avon said it expects next year’s earnings to rise by a percentage in the “low to mid-teens,” below its long-term objective of 16% to 18% growth, because of increased spending on new products and advertising.

* Cendant Corp. said its profit from continuing operations rose 37% to $235.3 million, or 31 cents a share, a penny higher than estimates, on strength in its real estate franchises due to growing sales of existing homes. Revenue fell 3.3% to $1.41 billion. Cendant, which also franchises hotels and Avis car rental, said it’s confident it can match full-year earnings estimates of $1 to $1.05 a share. The earnings were released after the close of trading.

* Harrah’s Entertainment Inc.’s third-quarter net income climbed 69% to $74.6 million, or 58 cents a share, as revenue jumped 39% to $814.1 million. The company cited its acquisition in January of Rio Hotel & Casino in Las Vegas and 13% growth in revenue from casinos open more than a year for the strong results.

* Liz Claiborne Inc. said third-quarter profit rose 5.9% to $66.4 million, or $1.08 a share, beating estimates of $1.03, as sales jumped 17% to $821 million.

* NCR Corp.’s profit from operations soared 76% to $44 million, or 44 cents a share, 3 cents higher than analyst estimates, as sales of its automated teller machines and cash registers overcame a drop in software for financial customers. Revenue edged up 2% to $1.53 billion.

Bloomberg News and Reuters contributed to this report.