Airline Earnings Show Fuel Respite

Major domestic carriers in recent weeks reported second-quarter profits amid higher load factors, gains in fare pricing and declines in the per-gallon cost of fuel.

American Airlines reported a $317 million second-quarter net profit, amid a record 83.6 percent load factor, a 2.3 percent increase in fare per mile and a lower fuel bill than the same period in 2006. Continental Airlines posted $228 million in net income for the quarter—its largest second-quarter earnings since 2000. Continental paid 1.5 percent less per gallon of fuel, but consumed 5.3 percent more in the second quarter of this year over last. Delta Air Lines, in its first post-bankruptcy quarterly earnings report, reported net income of $274 million, excluding reorganization items, detailing higher load factors, marginally lower fuel expenses and growing passenger yields.

JetBlue's $21 million net income for the quarter comes on the wings of a 2.8 percent decrease in fuel prices over the same period last year, as passenger yields were up 3.8 percent and load factors hit 83.5 percent, amid a 12 percent capacity increase.

Northwest Airlines for the second quarter reported a net profit of $273 million—excluding reorganization items—compared with a pre-tax profit of $179 million for the same period last year, when still under bankruptcy protection. The carrier said fuel averaged $2.04 per gallon, down 2.7 percent versus the second quarter of 2006. United Airlines posted net income of $274 million, while posting the highest level of revenue in its history. Its fuel bill declined to $1.206 billion from $1.25 billion in 2006's second quarter.

Southwest was the only major domestic carrier paying more per gallon than a year ago, as its fuel-hedging benefits are lessening. Yet, it still managed a net income of $278 million, and its $1.62 fuel cost per gallon still is among the best of domestic carriers.

Many carriers, though, anticipate fuel expenses to grow in the second half of the year, leaving them with a higher annual fuel bill, compared with 2006.

"While these are good results, we believe the industry continues to face challenges including overcapacity and higher fuel costs," Calyon Securities analyst Ray Neidl wrote in a research note. "As low-cost carriers continue to increase capacity and insist on competing on price, network carriers, particularly in the domestic markets, are unable to pass any increases onto their customers."