Several airlines announce record profits
Airlines reported record profits Thursday that yielded unexpected stock buy-backs, a rare dividend and even bonuses for workers who weathered the industry's difficult financial straits in recent years.
"They are in a period of strong demand with good capacity," Jim Corridore, equity analyst at S&P Capital IQ. "They are reaping the benefits of that."
American Airlines, which was in bankruptcy court last year and merged with U.S. Airways in December, announced the company's first dividend since 1980, based on record quarterly profits of $1.5 billion.
United Airlines, the only major U.S. airline to lose money in the first quarter, announced second-quarter income of $919 million, an increase of 51% from the same period a year earlier.
Southwest Airlines, the largest carrier of U.S. passengers which began its first international flights July 1, also reported record quarterly net income of $485 million or 70 cents per diluted share, which beat analysts' expectations of 61 cents. Southwest is offering workers a one-time bonus of $200 each to thank them.
And JetBlue Airways announced Thursday its 17th consecutive quarter of profitability, although the income included $242 million from the sale of subsidiary LiveTV.
"At first blush, the results are very strong," said Logan Purk, an industrials analyst at Edward Jones who follows Southwest. "It's just compounding what we've seen across the industry, which is strict capacity control, cost discipline and gradual price increases. All three of these things are working."
American Airlines Group and United Continental Holdings each plan $1 billion stock buy-backs, which should boost earnings for the remaining shareholders. American's board also approved a 10-cent-per-share dividend.
"It is hard to believe that less than eight months ago, American was in bankruptcy yet today we are reporting record profits, repaying debt, making additional pension contributions and declaring dividends to shareholders," CEO Doug Parker said. "Performance like this proves we are on the right track and gives us confidence as we move forward."
United CEO Jeff Smisek described the performance as "solid progress."
"Our team is focused on improving our operations and service and on continuing to improve year-over-year revenue performance and cost control," Smisek said.
Airlines also promoted their facilities. American has merged its operations with US Airways at 72 airports. United consolidated its operations at London's Heathrow Airport in a single terminal.
After the expiration of federal restrictions governing Love Field in Dallas, Southwest tripled flights to Washington's Reagan National Airport effective Nov. 2. The airline also inaugurated international service July 1 to Aruba, Jamaica and Bahamas.
"Together we have weathered the worst decade in the history of commercial aviation," Gary Kelly, Southwest's CEO, told workers. "Together we avoided bankruptcy. Together, we have transformed Southwest."
JetBlue reported revenue of $1.5 billion during April, May and June, with net income of $230 million, up from $36 million during the quarter a year earlier. The income represented 68 cents per diluted share.
"We saw improved profitability across our network, reflecting the success of ongoing efforts to adapt our products and services to meet our customers' ever-changing needs," said Dave Barger, JetBlue's CEO.
Analysts said while airlines performed well in the second quarter, shareholders will look for continued success in the heavily-traveled third and fourth quarters.
"I think in general across the industry expectations are very high," Purk said. "The optimism is so high on airlines, given how they've done a pretty good job of revamping their businesses and getting to profit margins we haven't seen in a very long time."