Delta Air Lines and US Airways on Wednesday each reported
solid third-quarter results driven in part by strong corporate travel. Delta
was more bullish, citing corporate travel for satisfying performances in New
York, Atlanta, the transatlantic and the overall premium-class market, while US
Airways stated "cautious optimism."
Commentary from the carriers' executives during quarterly
earnings conference calls seemingly contradicted general trends among mega
corporate travel agencies, which as a group in September saw another year-over-year drop in transaction volume, and specifically at American Express. Southwest Airlines, too, last week pointed to weaker demand during the
September quarter.
But Delta painted a prettier picture. "We continue to
gain traction in corporate revenues, with our corporate revenue bookings up 8
percent over the last four weeks," according to president Ed Bastian.
"We continue to see strong double-digit year-over-year performance in
financial services and banking, and our manufacturing and technology sectors
each grew at 9 percent."
In the domestic U.S. market, Delta credited corporate travel
for a strong third-quarter performance, including share gains, in New York and Atlanta.
In the transatlantic market, "similar to a comment I
made last quarter, the headlines don't match our results," said executive
vice president Glen Hauenstein. "Demand is actually moving both ways.
European multinationals who are having trouble doing business in Europe are
coming to the U.S. to do business."
Looking ahead, Bastian identified "continued corporate
revenue share gains" as one factor in a "solid" transatlantic
outlook "despite the economic backdrop," along with capacity
discipline by Delta and its joint-venture partners, and "product
improvements."
Delta's corporate travel outlook is positive across the
board. "In our quarterly survey of corporate travel managers, 82 percent
anticipate that travel spend will remain the same or increase versus the prior
year for the December quarter, and the level of optimism for travel spend
growth improves as we move forward into 2013," Bastian explained.
Morgan Stanley analyst John Godyn, while congratulating
Delta on "a great job with gaining corporate travel share," told the
carrier's executives that "there is a bit of a concern that you have
over-earned on corporate travel in recent years, given the challenges that some
of your competitors have had." As such, he wanted to know if Delta's
corporate travel share "will be put at risk" as American Airlines
edges closer to emerging from bankruptcy.
"We'll fight hard to make certain that we maintain all
the share that we have acquired," Bastian replied. "A fair bit of the
share we have acquired truly is new share as we've brought the benefits of our
investments in product, technology and facilities in New York and Atlanta. I
don't anticipate there will be a dilution of that as we look forward. I know in
recent weeks we have had some share gains from some of the problems that
American has had, but they are relatively modest, and candidly are not big
numbers of that share gain that we have seen."
Delta reported a third-quarter net profit of just more than
$1 billion, aided by $279 million in one-time items.
Waiting For Certainty
At US Airways, executives discussed moderating travel
demand—"particularly for business travel," according to one of the
carrier's U.S. Securities and Exchange Commission filings.
"During the quarter, leisure demand remained consistent
and, as we saw at the end of the second quarter, business demand was strong but
not as strong as it was during the first five months of the year," said
president Scott Kirby. "Corporate and business travel still feels like
they are waiting on some certainty on the election and resolution of the fiscal
cliff but we seem poised to enjoy an accelerating demand environment. We are
cautiously optimistic on demand going forward."
US Airways Group posted a record third-quarter net profit of
$245 million, up from $76 million a year earlier. Excluding special items
totaling $192 million, the result was the second-best third quarter in the
company's history.