Tax doesn’t slow leading LV airlines

Friday, Oct. 24, 1997 | 11:09 a.m.

The two airlines that fly the most passengers to Las Vegas overcame federal ticket tax woes to post improved earnings for the third quarter.

Phoenix-based America West Airlines and Southwest Airlines of Dallas released earnings reports that showed increased profits despite reduced loads systemwide. Both companies benefitted from reduced fuel prices with Southwest spending less and America West paying more because of added operations.

Nationwide, airlines were concerned that a restructuring of federal ticket taxes would put a dent in profits, but that apparently didn't materialize for the two discount carriers.

Southwest, which carries the most passenger traffic to McCarran International Airport, said net income increased 52 percent to $92.5 million (60 cents per share) from $60.9 million (40 cents per share) in the third quarter of 1996. Third-quarter revenues increased 11.9 percent to $997.2 million, compared with $891.5 million in the same quarter a year ago.

The airline's load factor, the percentage of seats filled by paying passengers, fell from 70 percent in the third quarter of 1996 to 65.8 percent. The drop was attributed to a 9.7 percent increase in available seat miles, a measure of the number of seats available multiplied by distance. Southwest added a new destination, Jackson, Miss., during the quarter.

America West, McCarran's No. 2 carrier based on passenger levels, saw its load factor fall from 71.8 percent to 70.5 percent for the quarter, but revenues increased 9.4 percent to a record $462.1 million. In the same quarter a year ago, the airline, which operates a hub in Las Vegas, had revenues of $422.5 million.

Net income was posted at $17.9 million (40 cents per share) compared with a net loss of $45.7 million ($1.03 per share) in the same quarter a year earlier.

America West executives attributed the improved performance to reduced unit costs. Although fuel consumption increased 7.1 percent from 90.2 million gallons to 96.6 million, the price per gallon fell from 66.97 cents to 59.36 cents.

"The airline has grown 8 percent and has experience both an increase in unit revenues and a decline in unit costs," Chairman and Chief Executive Officer William Franke said in a statement. "The decline in unit costs is particularly noteworthy as it serves to widen our strategic advantage of being the lowest cost hub-and-spoke major airline."

Management also complimented employees for improving on-time performance to 80 percent. For all of 1996, the airline had 71 percent of its flights on time.

Southwest and America West shares all fell Thursday along with most other airline stocks as the overall U.S. market tumbled about 2 percent, following a collapse of shares in Asian and European markets. Southwest dropped 50 cents to $35.31 and America West fell 62.5 cents to $14.81.

The two airlines followed the pattern set by Delta, Northwest Airlines Corp., Continental Airlines Inc. and US Airways Group Inc., which also reported earnings that topped analysts' expectations in the past week.

BLOOMBERG BUSINESS NEWS contributed to this report