Reports mixed for big LV airlines

Tuesday, Oct. 19, 1999 | 11:31 a.m.

America West Airlines reported record third-quarter earnings today and the best nine-month performance in the company's history. Its top competitor in Las Vegas, Southwest Airlines, reported a decrease in net earnings.

Phoenix-based America West, which operates a hub at Las Vegas' McCarran International Airport, reported third-quarter net income of $22.2 million or 57 cents per share, up from $21.9 million or 49 cents in last year's third quarter.

The airline reported third-quarter revenues of $552.8 million compared with year-ago quarter revenues of $499.3 million.

In a conference call this morning, Doug Parker, executive vice president of America West, said the bulk of the growth is concentrated on the company's Phoenix market. Parker said there may be some opportunity for additional long-haul day flights for Las Vegas, but decisions won't be made until after the company evaluates new day flights from Las Vegas to Boston, Philadelphia and Baltimore.

America West's primary focus in Las Vegas is on night flights. Once a plane arrives at a destination from Phoenix, it often is flown one more time to and from Las Vegas late at night or early in the morning.

Parker said the Phoenix market is underserved and while the airline has 220 flights a day from there, company officials believe capacity should be closer to 300 per day.

To build capacity, America West is in the midst of a 10 percent-per-year growth strategy in Phoenix and will get 14 new gates at Phoenix's Sky Harbor International Airport over the next year.

America West was affected by higher fuel costs.

"The year-over-year improvement is particularly encouraging given a significant increase in jet fuel prices in this quarter and the positive effect on last year's results of a strike by a major competitor," said William Franke, chairman, president and chief executive officer, America West Holdings Corp.

The company said fuel prices increased 27.2 percent to $60.2 million from $47.3 million in last year's third quarter.

The company also was enthused that its performance was better than the 1998 third quarter when pilots struck Northwest Airlines and America West picked up stranded passengers.

Franke said the company's eighth consecutive record-breaking quarter contributed to the best nine-month performance in company history. Since Jan. 1, the company reported record revenues of $1.6 billion, record net income of $90.4 million and record earnings per share of $2.26.

The Leisure Co., America West's tour packaging subsidiary, reported decreased earnings of $3.2 million, down from $5.9 million a year ago due to growth costs. The company acquired two travel agencies earlier this year, which drove revenue up 75.4 percent to $79.2 million for the quarter.

There were a few gray clouds on America West's horizon. The company reported load factors, the percentage of revenue-paying customers aboard planes, had decreased for the quarter from 71.9 percent in 1998 to 71.3 percent this quarter. Also, Parker said America West is carefully watching Southwest Airline's expansion in the Phoenix market.

With about seven new routes, Southwest's growth is not dramatic, Parker said, but it's "something that affects us."

America West is the second largest air carrier operating at McCarran. The largest airline, Dallas-based Southwest, reported its earnings were down 2.1 percent with results affected by higher fuel costs and schedules disrupted by Hurricane Floyd.

Southwest reported third-quarter net income down 2.1 percent to $127 million from $129.6 million a year earlier. Earnings per share were the same as in the third quarter of 1998, 24 cents. Revenue was up 12.7 percent to $1.175 billion from $1.043 billion a year ago.

The company reported its fuel costs were up 32.1 percent for the quarter.

"Our third-quarter 1999 results were adversely affected by significantly higher jet fuel prices and Hurricane Floyd," said Herb Kelleher, chief executive officer of Southwest. "Our load factor performance of 70.6 percent was quite strong, especially considering the effects of Hurricane Floyd."

Kelleher said customer bookings in October and the remainder of the fourth quarter are strong.

Southwest, which rapidly expanded in the Florida market last year, focused most of its attention on the East Coast this year and Kelleher said the markets of Long Island, N.Y., and Raleigh-Durham, N.C., have performed "exceptionally well."