Earnings Madness


Hey guys. Just thought I would pop in for a quick note. Yes, it’s earnings madness. This week and next week are the heaviest earnings weeks for the industry and yours truly is up to her eyeballs in earnings statements and earnings call replays.

But just a couple of things concerning earnings, since I realize I had not commented on earnings since Continental reported in last week.

First while I said I was somewhat underwhelmed with Continental’s numbers — we have to look at the airline’s results in context. Yes, the airline reported a profit. Yes, the numbers were quite good comparatively speaking. But Continental being Continental, and because the airline’s stock has always been on and off our target lists over the years — I was referring mainly to the fact I think the airline’s stock is pretty overvalued right now.

With the airline looking to add capacity in the 3-4% range systemwide next year, with JetBlue knocking some of the wind out of their revenue sails in Newark (although it sounded in an interview today that JetBlue CEO David Neeleman was hinting the airline might pull out of Newark because of problems with the constant delays, etc. there), with costs running a bit higher than expected this quarter, and with comps continuing to be tough for the rest of the year — I just don’t think these numbers show me the kind of “notable” numbers the airline would need for me to get excited about the stock right now.

So — no, in answer to a couple of notes, I had no problem with the results per se. I just didn’t see anything in there that surprised me on the positive side enough to get me to dive into the stock shark pool. I’d like to see the stock slip back a bit more before that.

Alaska Airlines reported earnings this week, as did JetBlue.

Alaska had an excellent quarter. The airline continues to work at cutting its cost structure — but it also appears that it just may have its operational issues under control as well. Numbers here were good. Revenues were good, and costs continue to be addressed. Horizon, Alaska’s regional partner, also had a good quarter.

JetBlue, on the other hand, had a fair to middlin’ quarter. Marginally good, I guess is what you could call it. One thing I would recommend is that if you are interested in JetBlue, listen to this quarter’s earnings call. There are a lot of things that are addressed in that call. It’s an interesting listen.

Mesa reported earnings this morning. I have not had a chance to listen to that call as of yet. I will do that in the morning. However, I can say that my first impression at looking at the airline’s numbers was not positive. Looks like the airline had much higher start-up costs than expected as part of their Hawaii 5-0 project, aka “go!”, and they are also up to their old tricks in terms of revenue items and unusual charges.

Essentially the airline included $13.1 million in U.S. Airways’ bankruptcy gains as part of their earnings for the quarter. No. I don’t think so. Neither does JP Morgan analyst Jamie Baker. That should have been treated as a one-time gain.

To put it another way, if you take that $13.1 million one-time gain out of the mix, it would make a big difference to the airline’s earnings for the quarter, as the airline reported net earnings of $10.9 million.

Meanwhile Mike Linenberg, analyst with Merrill Lynch said in his note on the results that it was unclear what the $7.8 million in additional “one-time” additional expenses the airline reported were. As he put it, it was not clear if this was attributable to start-up costs with “go!,” or the transition of aircraft from US Airways to United and Delta.

Maybe this explains why the airline went to the “economy” employee medical insurance plan this spring. Heh.

Hopefully these issues are addressed more fully in the airline’s earnings call.

Talk to you guys later.