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U.S. airlines likely to report nearly $4 billion in profits


Well-known member
Jan 9, 2005
Total Time
Andrew Harrer/Bloomberg
American Airlines Group Inc., formed Dec. 9 in the merger of US Airways Group Inc. and AMR Corp, is expected to earn $1.4 billion, or $1.93 a share, in the second quarter, excluding special items and charges.
By TERRY MAXON Staff Writer tmaxon@dallasnews.com
Published: 20 July 2014 09:02 PM
Updated: 20 July 2014 09:06 PM
Passengers kept climbing aboard. Fuel prices didn?t soar. As a result, the big U.S. passenger airlines are expected to post profits of close to $4 billion for the second quarter when they release financial results this week.
Analysts? estimates for 11 U.S. passenger airlines show projected combined earnings of $3.8 billion, excluding special items and one-time charges.
By comparison, the same carriers posted profits of about $2.6 billion in second quarter 2013, excluding any items and charges, and less than $1.3 billion in the same period in 2012.
?Not only will this be a record June quarter net profit,? analyst Michael Linenberg of Deutsche Bank said in a July 10 research note, ?but the underlying operating margin of 13.3 percent is similar to what was observed during the industry's last peak earnings period? of 1996 to 1999.
But what makes the current profit margins more impressive is that they are being accomplished under less favorable circumstances, Linenberg wrote.
In 1996 to 1999, U.S. gross national product grew an average of 4.4 percent annually, compared with the 1.7 percent consensus for 2014. A barrel of crude oil averaged $19 in those years, compared with the 2014 year-to-date average of $101, he wrote.
?These results are in stark contrast to what we are seeing from many overseas airlines, which are being challenged by competitors that lack capacity discipline,? Linenberg added.
Leading the group is the big newcomer, American Airlines Group Inc., formed Dec. 9 in the merger of US Airways Group Inc. and AMR Corp. Analysts? consensus is that Fort Worth-based American will earn $1.4 billion, or $1.93 a share, excluding items and charges.
On July 9, American alerted investors that its earnings would include around $600 million in such items for the second quarter. That will reduce its net income under generally accepted accounting principles to about $800 million.
Its biggest U.S. competitor, United Continental Holdings Inc., is expected to report earnings of just under $800 million, or $2.14 a share, excluding charges. But the parent of United Airlines Inc. has also warned investors of special items ? $169 million?s worth ? that will reduce its net income.
Analysts expect Delta Air Lines Inc. to earn around $885 million, or $1.04 a share, for the three months ended June 30.
And No. 4 Southwest Airlines Co. is predicted to report earnings of around $425 million, or 60 cents a share.
Delta spooked the markets on July 2 when it reported that its unit revenue increased 4.5 percent in June, less than investors had expected.
Delta cited ?continued corporate and domestic strength.? However, like other international carriers in recent weeks, Delta said its results were reduced by ?lower than expected international yields driven by industry-wide capacity increases,? as well as ?lower business demand to Latin America due to the World Cup.?
That, along with warnings from such carriers as Lufthansa and Air France KLM, caused stock prices for a number of airlines to dip. But American?s chairman and chief executive officer Doug Parker said July 8 that he didn?t see a problem with international capacity since demand was also growing in international markets.
Wolfe Research analyst Hunter Keay, in a July 11 note, called the ?panic overdone.?
?International is certainly softer than domestic, largely driven by excess capacity in our view, but probably not as much as people feared,? Keay said. He added that he expected ?good? trends of passenger unit revenue in the second half of 2014.
Hawaiian Holdings Inc. kicks off the airline earnings season on Tuesday, followed by Delta and Allegiant Travel Co. on Wednesday. Five carriers report on Thursday: American, Southwest, United, JetBlue Airways Corp. and Alaska Air Group Inc.
The current estimates from analysts put those carriers? earnings about $275 million higher than the consensus a month earlier. By the end of the week, investors will know if the growing confidence in the airline industry is well placed.
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