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  January 23, 2004 No one is humming Happy Days Are Here Again, but solid earnings reports Thursday from America West and Southwest airlines and forecasts for even better times this year add to the growing evidence that the low-fare end of the industry is in its best shape since the terrorist attacks. Tempe-based America West reported its third consecutive quarterly profit and its best fourth-quarter showing since 1999. The airline earned $6.8 million in the October-December period, compared with a loss of $52 million in the same period a year earlier. Sales rose nearly 8 percent, to $554 million. Wall Street analysts had forecast a quarterly loss. The company said sharply lower costs, from cost cutting and flying its planes more frequently, were the main driver. "We are simply elated with these results and excited about our future," America West Chairman and Chief Executive Officer Doug Parker said in a conference call with analysts. For the year, America West reported earnings of $57.4 million on sales of $2.2 billion, vs. a net loss of $388 million on sales of $2 billion in 2002. The annual results were helped by $81.3 million in government rebates of security fees. Still, America West workers will receive profit-sharing payouts for the first time since 1999. The checks, equal to 5 percent of pay, will go out Tuesday to 5,600 non-union workers, the company said. Southwest, which has remained relatively strong throughout the turmoil, never reporting a loss, had net income of $66 million, up 57 percent from $42 million a year ago. Its costs rose, but average fares were up. Sales rose 8.3 percent, to $1.52 billion. "For the first time in three years, we're starting a year with an improved outlook," said Gary Kelly, chief financial officer of Southwest, the second-largest carrier at Sky Harbor International Airport after America West, with more than 180 daily departures. Both airlines have ambitious growth plans this year. Southwest is adding 29 planes to its fleet, for a growth rate of nearly 8 percent. Southwest adds Philadelphia to its route system in May with 14 daily flights. It's the airline 's first new city since Norfolk, Va., was added in October 2001. "We are well-prepared financially to resume our more traditional capacity growth rate and tackle a major new market like Philadelphia," Kelly said. America West plans to grow by 8 percent to 10 percent, with 60 percent coming from new cross-country service that bypasses Phoenix and Las Vegas hubs and 40 percent from increases out of the hubs. All eyes are on its new transcontinental service, which debuted in October. America West offers non-stop flights between New York and San Francisco and Los Angeles and Boston. Boston-San Francisco service starts March 1. The new service, which treads on business-travel-heavy routes long dominated by industry giants such as American, ignited a nasty fare war, the depths of which America West did not expect. Round-trip fares as low as $158 are out there. Business travelers can go at the last minute for as low as $159 each way. Despite the rock-bottom fares, America West said it still broke even on the routes in its second month and plans to announce additional cross-country service soon. Parker said competitors' fares are designed to drive America West out of those markets, something it has no plans to do. America West's stock, which soared last year, closed Thursday at $12.69, up just 3 cents a share despite the surprise profit. Goldman Sachs airline analyst Glenn Engel said America West's results were "terrific," but that some investors were concerned that its fare momentum is slowing. Southwest rose 39 cents, to $15.49. Market influences Airlines like America West and Southwest are reporting improved earnings. Factors in the airlines' favor:
Factors working against the airlines:
This article originally appeared in the Arizona Republic on January 23, 2004 and was written by Dawn Gilbertson. |
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