Tuesday, July 18, 2000 | 11:19 a.m.
SUN STAFF AND WIRE REPORTS
The big airlines largely responsible for filling the growing number of Las Vegas hotel rooms issued reports today showing their profits moved in different directions in the second quarter.
Low-cost carrier Southwest Airlines today reported second quarter net income of $190.6 million or 36 cents per share, a 21 percent jump from the $157.8 million, or 29 cents per share, recorded in the year-ago period.
Analysts had expected 31 cents a share for the Dallas airline, which is the busiest carrier at Las Vegas' McCarran International Airport with 154 flights and plans to expand in Las Vegas to 164 daily flights by Oct. 29.
The No. 2 carrier in Las Vegas, America West Airlines, saw its profits fall due to higher fuel prices and other factors.
At Southwest, revenue for the three months ended June 30 rose nearly 20 percent, from $1.22 billion to $1.46 billion.
Although Southwest's spending on fuel and oil rose 92 percent to $197.6 million over a year ago, it reported that total operating expenses rose 18.6 percent, to $1.15 billion. When divided by passenger capacity, total expenses rose just 4.2 percent.
Overall, Southwest's passenger load for the quarter increased to 74.3 percent from 73.1 percent a year ago, the airline said.
Chairman, President and Chief Executive Herb Kelleher said the airline benefited from a strong economy and "modest" fare increases - the average fare rose 8 percent, to $85.81.
Kelleher said revenue growth continued into July, the first month of the third quarter, and bookings for August and September have been strong. He said based on those trends, he expects Southwest to beat last year's revenue again in the third quarter.
For the first six months of the year, Southwest said net income of $264.1 million rose 4 percent over the year-ago figure of $253.6 million. This year's six-month net income figure was lowered by a $22.1 million first-quarter charge for a change in the way Southwest accounted for revenue from its frequent-flyer program.
Revenues of $2.7 billion, an 18 percent increase from the year-ago period of $2.3 billion.
In midday trading, Southwest shares rose 56.25 cents to $21.688.
In Phoenix, the parent company of America West Airlines reported net income of $33.5 million for the three months that ended June 30 -- $8.8 million less than the same period last year.
America West has a hub in Las Vegas, where it has 89 daily flights.
Its earnings amounted to 91 cents a share, including 17 cents, or $10 million before taxes, the company made by selling its majority interest in National Leisure Group and the Vacation Store. Analysts had project earnings of 88 cents.
Company officials said earnings were hurt overall by the 52 percent year-over-year increase in fuel costs and that the company would have beat the record $42.5 million it earned in the second quarter last year had fuel prices remained steady.
"But for the sharp increase year over year in jet fuel prices, this would have been the best financial quarter in America West's history," said William A. Franke, chairman and chief executive of America West Holdings Corp., the parent of the airline and The Leisure Co., a travel package company.
"We remain encouraged by our continued improvement in unit revenues, which reflects the success of our growth strategy," he said in a written statement.
America West reported record second quarter revenue of $604.8 million compared with $554.2 million in the second quarter of 1999.
W. Douglas Parker, executive vice president of America West, said the airline made modest improvements in flight cancellation rates, completing 96.1 percent of its scheduled flights during the quarter. That was up from 95 percent during the first quarter, but Parker said continuing maintenance issues pushed the completed flight rate lower than the airline had hoped.
"It will take some time, but we're seeing nice progress," Parker said. "The good news is this is fully fixable and we know what the issues are."
He said the flight cancellations do not appear to be affecting bookings.
Fuel expenses for the quarter increased $30 million or 57 percent over the same period last year. The increase was driven by a 52 percent increase in average fuel cost per gallon from 1999 to 2000.
The company said it was, however, able to offset some of the increase with its fuel hedging program, which allowed it to save $6 million on fuel costs during the quarter.
Parker said it has little fuel hedging in place for the coming quarters.
In late morning trading on the New York Stock Exchange, shares of America West were down 35.5 cents at $17.875.
And Houston-based Continental Airlines, a smaller player in Las Vegas, today said its net income was $149 million, or $2.33 per share, a 13 percent increase compared to $132 million or $1.73 per share in the year-ago period.
The results for this quarter include early debt repayment charge of $4 million. Excluding the charge, Continental earned $2.46 per share, easily beating expectations.
Analysts surveyed by First Call/Thomson Financial were expecting $2.05 per share.
Investors were pleased with the results, pushing shares of Continental up $1.063 to $54.063 in midday trading on the New York Stock Exchange.
Second-quarter revenue rose 18 percent to $2.57 billion, up from $2.18 billion in 1999. Passenger revenue was a record $2.42 billion, an 18 percent increase from $2.05 billion in the year-ago quarter.
Higher fuel prices throughout the quarter were mostly responsible for driving up costs by 10 percent compared to the same period a year ago, the company said.
However, those costs were more than offset by increases in passengers for all of Continental's markets, including domestic, trans-Atlantic, Latin American and Pacific routes.
During the first half of 2000, Continental earned $163 million, or 63 cents per share, an 11.4 percent decrease from the $184 million, or 77 cents per share, it earned for the first six months of 1999.
Revenues for the January-June period of this year were $4.85 billion, up 14.8 percent from $4.22 billion a year ago.
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