Tag Archives: NYSE:CAL

Southwest Airlines, United Airlines and Continental Airlines Report Earnings

On the first of a three-day onslaught of earnings that can only be described as “earnings hell,” Southwest, Continental, and United Airlines all reported their second quarter numbers today.

The short and sweet?

While Southwest Airlines reported a profit for the first time in three quarters, the airline’s guidance for the third quarter was not very rosy. So much so that the airline said it could not guarantee a profit for the third quarter. The airline posted a profit of $54 million or $0.07 for the quarter. This represented a 51% decline in profits over last year’s $121 million.

Operating income at the airline declined by 40%, to only $123 million.

Based on weak travel demand and fuel price volatility, we cannot predict a profitable third quarter,” said Gary Kelly, Southwest chairman, president and CEO.

United Airlines also posted a “profit” — but don’t let those headlines fool you. The airline only posted a “profit” as a result of one-time items and fuel hedge gains. Repeat after me: The airline did not post a real honest-to-God profit.

Excluding all the accounting handiwork, the airline lost $323 million or $2.23 for the quarter. This was, however, better than what the analyst consensus had been for the airline. Analysts had forecast the airline would post a loss of $2.61.

As for Continental, the airline posted a loss of $213 million, or $1.72 a share. Excluding special items, the airline posted a loss of $169 million or $1.36.

Continental posted a $154 million operating loss, which was 116% worse than the second quarter of 2008.

Those are the basics folks. Not exactly the kind of news that makes you want to jump up and down. Much less buy airline stocks. Because as we all know — if the airlines can’t make money in the second quarter — we don’t even want to see what’s coming next in the third and fourth quarters.

Someone noted to me in an email this morning,

“Holly, just looking over the Continental numbers. You know I was thinking about what you wrote this week in PlaneBusiness Banter concerning why Larry [Kellner] would choose to leave the airline right now, and the strength of the management team at Continental. I think the reason Larry has decided to leave this industry is obvious when you look at these results and realize that this airline clearly has one of the best management teams around. But even as good as they are — the airline is STILL not profitable. I can see Larry’s point.

Larry, get out of this industry, go make some money and have a good time doing it.”

I’m afraid our PBB subscriber speaks the ugly truth.

Shocker: Larry Kellner to Leave Continental At End of Year

Frankly, there is usually very little that shocks me about this industry. Surprises me, yes. Piques my curiosity, yes. But shocks me — no.

But I got caught out in left field on this one.

This afternoon Continental CEO Larry Kellner announced in a letter to employees, and in a press release, that he was leaving the company, effective the end of the year.

But wait, he’s just not leaving as CEO. He’s leaving his position as Chairman of the Board of the airline as well.

Gone.

Kellner is leaving the airline to head up a new private investment firm, Emerald Creek Group, LLC.

The airline announced that Jeff Smisek, President and COO of Continental, will succeed Larry as CEO and Chairman of the Board.

How about that?

Another good one bites the dust.

Continental/United Antitrust Immunity Granted: With a Few Strings

Continental Airlines was granted limited antitrust immunity today by the U.S. Department of Transportation — a move that will allow it to join United Airlines and other airlines in the Star Alliance in creating schedules and determining fares.

The order did, however, set limits on the antitrust immunity in regards to some international routes.

The order excludes rights between the U.S. and Beijing. In addition, the order also does not grant immunity for those flights between U.S. and Canada, and to those flights between New York and Copenhagen, Geneva, Lisbon, and Stockholm.

These “strings” were more or less foreshadowed in the recent Department of Justice filing, in which the DOJ discussed the possibility of “harm to consumers” on routes between the U.S. and China, Canada, Denmark, Portugal, Sweden and Switzerland.

The decision did, however, give the green light to a proposal that will see Continental, United, Lufthansa and Air Canada create a joint venture for some international flights.

This was the right call for the DOT to make, although the DOJ ruling last week was a bit troubling. As I have said for years, if U.S. ownership laws continue to hamstring U.S. carriers from linking up directly with international counterparts, then antitrust immunity — which allows them to participate more fully with international carriers — is the answer.

Continental Airlines Pulls the Cord on Mexico Capacity

This morning Continental Airlines announced that it was cutting capacity on its flights to Mexico by 50%.

As we noted here last week, 5.3% of Continental’s total passenger revenue is derived from Mexico flights. The airline has more flights scheduled to Mexico than any other airline, with an average of 450 flights per week.

The new schedule begins Monday.

The airline said that service to all of its 29 Mexican destinations will continue. However, the frequency of flights has been cut, and on some routes regional aircraft will replace larger aircraft.

Continental’s RASM Numbers More Or Less In Line: Still Starkly Negative

Continental Airlines released their traffic report last night and the result was more or less what had been expected — in terms of what analysts had expected the airline would post in terms of its estimated RASM figures.

The airline said that it estimates RASM was down, year-over-year, by between 18.5% and 19.5%.

This was just a hair worse than the estimate of both analysts Jamie Baker with JP Morgan and Bill Greene with Morgan Stanley.

As for basic traffic, the airline said that its domestic traffic levels were down 12.4%, while international was down 7.5%. Total traffic was down 10%. Capacity, meanwhile, was down 7% overall. This resulted in a decline in load factor of 2.7 points, down to 79.9%.

The rest of the sector will begin to roll out their bad traffic news today.

One thing to remember, however. As bad as these numbers are — remember that Easter came very early last year, and all the revenue bump associated with Easter was in March last year. So comps were going to be difficult regardless.

Not to say that this makes these abysmal numbers any easier to swallow in the big picture, but jus’ sayin.

Continental Airlines Express Air Crash

The industry suffered yet another crash last night, as a Continental commuter aircraft operated by Colgan Air apparently dove into a house shortly before it was scheduled to land in Buffalo. All 49 crew members and passengers on the aircraft were killed, as was one person who was in the house.

The aircraft involved was a Bombardier Q400.

Bloomberg reports this morning that the aircraft, registration number N200WQ, was ordered by Pinnacle Airlines in 2007 and handed over to the carrier’s Colgan Air unit on April 16 last year. Colgan was operating it on behalf of Continental Airlines, Inc.

Biggest Airline Stock Loser for the Week: American Airlines

I’m working on this week’s PBB. This week’s Market Review section to be more specific.

Just thought that it was worth noting that while shares of Southwest Airlines bounced around all over the place this week — when all the shouting was over, shares of the Dallas-based airline ended down 7% for the week, closing today at 8 bucks even.

They were not even a member of the select PlaneBusiness Basement Double-Digit Loser Group for the week.

No, the airline stock that took the award for posting the biggest loss for the week was AMR, parent of American Airlines, which saw shares drop a hefty 33% for the week, ending the week at 7.62.

This was far and away the worst performance notched by an airline this week, although Continental Airlines was down 17% for the week, closing at 17.22, as it took second place honors at the bar in the basement.

Other major airlines to post a double-digit decline for the week were Alaska Air Group, which was down 11%, closing at 26.56, and Delta Air Lines, which lost 10% to close at 10.26.

The vast majority of stocks we track at PlaneBusiness finished down for the week. The reason? The price of oil once again raised its ugly head as the week came to an end.

Oil futures closed Friday at 44.65/barrel — up 22% for the week.

Ouch.

I told you guys OPEC was going to get serious about cutting production this time. And….they seem to be doing just that.