U.S. airline stocks rose, extending one of the industry’s biggest rallies this year, after American Airlines and United Airlines led four carriers in exceeding quarterly profit estimates.
Southwest Airlines Co. and Alaska Air Group Inc. also beat earnings projections as the industry benefited from strong passenger demand and a 9.7% drop in fuel costs in the third quarter from the prior three-month period. JetBlue Airways Corp. was the lone holdout in falling short of estimates Thursday.
Demand in the U.S. and overseas “seems pretty strong, just more so domestically,” said Logan Purk, an Edward Jones & Co. analyst in St. Louis.
The Bloomberg U.S. Airlines Index rose 1.3%, leaving the gauge up 23% in the past eight days. United initially fell after forecasting a possible fourth-quarter drop in a benchmark revenue gauge, then reversed that slide.
Thursday’s earnings capped results for the six largest airlines. Delta Air Lines Inc., No. 3 in the world behind American and United, said last week that its quarterly profit beat estimates.
Earnings for United, excluding some one-time costs, were $1.1 billion, or $2.75 a share, exceeding the $2.70 average estimate compiled by Bloomberg. United said its yield, or the average fare per mile, rose 7.6% last quarter for U.S. travel, the highest of any of the airline’s regions.
United said earlier that fourth-quarter passenger revenue from each seat flown a mile will range from a drop of 1% to an increase of the same amount.
“That is down from what people were looking for,” said Joseph Denardi, a Stifel Financial Corp. analyst. United shares rose 1.5% to $49.78 after a drop of as much as 4.9%.
Southwest’s bookings for November and December are “good,” Chief Executive Gary Kelly said. Dallas-based Southwest is the biggest discount carrier and gets almost all its revenue from U.S. flights.
American said it expects record earnings this quarter and the full year, following the merger with US Airways Group in December 2013. Fort Worth, Texas-based American said profit excluding one-time items rose 59% to a record $1.2 billion, or $1.66 a share, topping analysts’ $1.63 estimate.