Harsh winter hit airlines' bottom lines
Airlines were battered at the start of this year, as storms and bitter cold wreaked havoc with travel schedules, forcing the cancellations of tens of thousands of flights.
United Airlines is reporting a $609 million loss during the first quarter, according to the airline's earnings report out Thursday.
"Our financial performance in the first quarter was disappointing,'' Jeff Smisek, United's president and CEO said in an earnings call with investors. "Although the historic winter weather adversely affected results ... we know we can do better and are taking actions to do just that."
Jim Compton, United's vice chairman and chief revenue officer said that the airline canceled 35,000 flights in the first three months of the year. "This is the equivalent of not flying for seven of the 90 days this past quarter,'' he said, noting that cancellations were two-and-a-half times the number during the same three month period in 2013.
But several other carriers managed sometimes record-setting profits despite the weather setbacks, showing how the industry's new-found discipline is paying off.
"It's a sign that the industry has really fundamentally transformed itself from a boom-and-bust cycle to something where there's the potential for sustainable long-term profitability, even when there is bad weather,'' says Jim Corridore, equity analyst with S&P Capital IQ. "They've gotten a grip on capacity. They've gotten pricing power.''
JetBlue posted a profit of $4 million, or one cent per share, though that was far below its $14 million profit during that three-month period last year.
The carrier, whose operations are heavily concentrated in the Northeast, says the winter wallop was particularly challenging, increasing costs for overtime and eroding revenue. JetBlue canceled 4,100 flights during the first three months of the year, slashing its revenue by roughly $50 million.
"We canceled nearly twice as many flights in the first quarter as we canceled in all of 2013,'' Dave Barger, JetBlue's president and CEO, said in an earnings call with investors on Thursday.
American, which closed its merger deal with US Airways in December, posted a record-setting profit of $480 million in the first quarter. A year ago, during that time period and before the merger, the airline reported a loss of $341 million.
When not counting special items, American saw a profit of $402 million. Because American and US Airways are at the start of their integration, the airline is emphasizing results that don't factor in special charges, which it feels is a more accurate reflection of performance.
"In the entire history of American Airlines, we have never earned $400 million in the first three months of a year'' American's CEO Doug Parker, said in a letter to employees. "But in the first three months since the merger, we did. ... We faced an extremely challenging operating environment in the first quarter due to weather, but our teams pulled together to take care of our customers, and helped us lead our peers in on-time arrivals and baggage performance in January.''
Southwest also saw record profits. Despite having to cancel more than 7,500 flights because of the tumultuous weather, the carrier posted a first-quarter profit of $152 million, or 22 cents per share, counting special items that added $26 million to the airline's bottom line. That was a significant increase on the $59 million profit the airline saw during the first three months of last year, counting special items.
Delta had to cancel more than 17,000 flights in January and February, leading to a revenue loss of $90 million. Yet, the carrier still saw a profit of $213 million in the first quarter of this year.
United's losses were not unexpected, Corridore says. But its performance underscores that it continues to have integration problems four years after merging with Continental.
"They're not as far along with getting costs under control as we were hoping,'' he says. "It's taking them time to turn the ship around.''