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United, JetBlue Top Estimates as Higher Fares Mute Fuel Cost

January 27, 2012

(Updates with closing share price in seventh paragraph.)

Jan. 26 (Bloomberg) -- United Continental Holdings Inc. and JetBlue Airways Corp. posted fourth-quarter results that exceeded analysts’ estimates as higher fares helped overcome rising fuel costs.

United’s profit excluding some items was $109 million, or 30 cents a share, which beat the 11-cent average of 14 estimates compiled by Bloomberg. JetBlue’s net income almost tripled to $23 million, or 8 cents a share, topping analysts’ 4-cent average. JetBlue also said it’s freezing management hiring and pay to help hold down costs.

United, the world’s largest carrier after merging with Continental in 2010, and other airlines benefited from planes that flew more than 80 percent full, giving them more pricing power to increase fares. Chicago-based United’s sales for the quarter rose 5.5 percent to $8.93 billion.

“Our strong revenue performance is a direct result of offering customers an unmatched global route network and competitive products, and our co-workers’ focus on service,” United Chief Revenue Officer Jim Compton said in a statement.

United, JetBlue and Alaska Air Group Inc. are the last of the major U.S. carriers to report results for the quarter.

Alaska Air was alone in trailing analysts’ estimates. The Seattle-based carrier said today that profit excluding fuel hedging gains fell to $37.2 million, or $1.02 a share, less than the $1.14 average of 14 estimates.

United Shares Rise

United rose 6.3 percent to $21.70 at the close in New York, for its biggest one-day gain since Dec. 1. JetBlue advanced 4.1 percent to $5.80. Alaska Air fell 3.6 percent to $72.71, its steepest drop since Oct. 25.

Delta Air Lines Inc., Southwest Airlines Co. and US Airways Group Inc. have each reported fourth-quarter earnings that exceeded estimates, pushing the group to combined net income of $544 million, or $635.2 million excluding what the companies consider one-time items.

AMR Corp., parent of American Airlines, isn’t reporting quarterly results during its bankruptcy reorganization.

United’s one-time costs included $170 million related to the integration of United and Continental, and $79 million for ending a maintenance contract early, aircraft sales and reserves for legal matters, according to a disclosure to investors last week by the company.

Net Loss

Including those items, the net loss was $138 million, or 42 cents, narrower than the $325 million, or $1.01, a year earlier. The carrier’s fuel bill for the quarter jumped 26 percent to $3.11 billion and was its biggest expense. The company trimmed capacity 2.5 percent to help reduce costs.

United and Continental received a single operating certificate from the U.S. Federal Aviation Administration during the quarter, and the carriers are “well positioned” to reach integration goals in 2012, Chief Financial Officer Zane Rowe said in a statement.

JetBlue credited a 22 percent jump in revenue to a record $1.15 billion and tight cost controls for helping mitigate a 30 percent rise in the average price it paid per gallon. JetBlue’s passenger unit revenue, a measure of demand for travel and ticket prices, climbed 12 percent.

Chief Financial Officer Mark Powers disclosed the plan to halt management hiring and salary increases on a conference call. Mateo Lleras, a spokesman, said the New York-based airline wouldn’t comment on how much money the move will save.

‘Growing Older’

The airline is working with maintenance, repair and overhaul vendors to reduce the size of annual cost increases and expects such changes to slow in the future, Powers said. JetBlue’s fleet of Airbus SAS A320s and Embraer E190 jets has an average age of 6.1 years, one of the youngest in the U.S. industry.

“The fleet is growing older,” Powers said. “The rates and honeymoon we enjoyed prior to this period of time are in the past.”

JetBlue plans to continue to expand, boosting flight and seating capacity as much as 11.5 percent this quarter and as much as 7.5 percent for all of 2012.

Costs to fly each seat a mile, excluding fuel, will climb as much as 5 percent this year, Powers said in a statement.

Alaska Air, the parent of Alaska Airlines and Horizon Air, said net income including the hedging gains slipped 1.2 percent to $64 million, or $1.76 a share, from $64.8 million, or $1.75, a year earlier.

Revenue climbed 9 percent to $1.04 billion, as schedule changes and new routes boosted traffic by 6.7 percent on Alaska Air’s main jet operations.

--With assistance from Cecile Daurat in Wilmington. Editors: John Lear, Cecile Daurat

To contact the reporters on this story: Mary Jane Credeur in Atlanta at; Mary Schlangenstein in Dallas at

To contact the editor responsible for this story: Ed Dufner at

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