Bloomberg News

Airlines Rally as Delta Joins US Airways in Revenue Gains

September 05, 2012

US Airways Group Inc. and larger competitor Delta Air Lines Inc. (DAL:US) were among the top performers in an index of U.S. carriers after overcoming a sluggish economy to post monthly unit-revenue growth.

Passenger revenue for each seat flown a mile, a measure of airline performance, rose 4 percent at Atlanta-based Delta and 1 percent at US Airways. Miles traveled by paying passengers increased at both carriers, according to statements.

The Bloomberg U.S. Airlines Index climbed 3.4 percent, the most since Aug. 20, with US Airways outperforming the other nine members. The Tempe, Arizona-based carrier rose 7.4 percent to $11.22 at the close of New York trading, while Delta advanced 3.7 percent to $8.88.

“The macro headlines are scary out there, so the fact that demand seems to be pretty stable is pretty good,” said Michael Derchin, a CRT Capital Group analyst in Stamford, Connecticut. “The airlines have also been doing a very good job of preemptively reducing capacity growth to keep it in line with demand.”

United Continental Holdings Inc. (UAL:US), the world’s largest airline, jumped 5.4 percent to $19.07 after disclosing plans to cut available seating capacity for a second time in the remainder of the year.

United said it would trim available seating by about 1 percentage point, citing concern that the slowing economy would hurt demand. That brought the Chicago-based company’s total planned reduction for the four-month period to 2 percent to 3 percent.

‘Modest Slowness’

“We are beginning to see some modest slowness in the economic outlook and we’re responding accordingly,” Chief Financial Officer John Rainey said at a Dahlman Rose & Co. transportation conference in New York.

Companies still are making core business trips, even though some have reduced discretionary travel to conventions or conferences, US Airways President Scott Kirby said at the conference. Pricing remains strong, he said.

“Leisure demand, the best proxy for the underlying economy, remains strong,” Kirby said. “As we get into the fourth quarter and there is more certainty around the election and the situation in Europe, we’re set up for a demand environment that can improve.”

To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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Companies Mentioned

  • DAL
    (Delta Air Lines Inc)
    • $37.23 USD
    • -0.22
    • -0.59%
  • UAL
    (United Continental Holdings Inc)
    • $45.7 USD
    • 0.53
    • 1.16%
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