US Airways hit the airline jackpot in the second quarter — higher fares plus lower fuel prices. Its net income tripled to $306 million.
The results could strengthen US Airways' case for a merger with American Airlines while American reorganizes in bankruptcy court.
The bigger profit for US Airways wasn't because it carried a lot more passengers — traffic rose just a half-percent. But passengers paid 7.4 percent more to fly compared to the same period a year ago. Airlines raised fares in 2011 and early this year, and those higher fares paid off for US Airways in the quarter ended June 30.
"The driver of this improvement was revenues," Chairman and CEO Doug Parker said on a conference call. Competitors such as Delta and American are reaping the benefits of higher fares as well.
Lower fuel prices helped, too. US Airways' fuel spending per gallon fell 3.5 percent from a year ago, slicing about $40 million from what its fuel bill would have been at last year's prices, Parker said.
There was a note of caution: President Scott Kirby said on the conference call that the airline had seen a "modest slowdown" in business demand starting in May when economic worries were in the headlines. US Airways stock had been up almost 8 percent until then, but Kirby's remarks drove it down. Shares closed down 46 cents, or 4 percent, at $11.13. Business travelers are an airline's most profitable customers, so investors get nervous at any sign of a downturn in corporate travel.
Kirby said business travelers are quick to cut back trips when their companies are worried — and quick to start traveling again once the fears subside. He said spending by leisure travelers has held up well.
US Airways' second-quarter profit worked out to $1.54 a share. During the same period a year ago, it earned $92 million, or 49 cents per share. Not counting special items, the company would have earned $1.61 per share in the recent quarter, 5 cents above what analysts surveyed by FactSet expected.
Unlike other big airlines, US Airways doesn't hedge fuel spending by betting on oil prices. That means it benefits right away when fuel and oil prices fall, as they did during the second quarter. Delta Air Lines Inc. posted a second-quarter loss on Wednesday because it had to account for oil price bets that went sour, although it would have been profitable if not for those bets.
Revenue rose 7.2 percent to $3.75 billion, matching analysts' expectations.
US Airways said the quarterly profit was its biggest since the 2005 combination of US Airways and America West, which created US Airways Group Inc. It was also bigger than any posted by either of those companies separately.
The performance could help convince the committee of American's unsecured creditors on the value of a merger. The committee will hold a lot of sway in deciding whether American comes out of bankruptcy as a stand-alone airline or merges with another one.
Tom Horton, who runs American, has resisted. He said in an interview over the weekend that Parker is in "a race against the clock" to increase revenue before labor costs increase. US Airways is "seeking to solve their own problems" with a merger, Horton said.
On the conference call on Wednesday, Parker declined to address Horton's recent comments. He did say he's viewing American's merger evaluation plan "somewhat skeptically," but added that his team is "really hopeful that we're wrong."
US Airways expects to get a non-disclosure agreement from American as it begins to explore merger options. Asked whether US Airways would decline to sign an agreement that bars it from buying more American debt or mounting a hostile takeover attempt, Parker said the airline won't sign anything that puts it at a disadvantage.
"If it turns out this is not the start of the full and fair process we hoped for, we'll have to evaluate our options to ensure that the real parties in interest — AMR employees and creditors — get the chance to evaluate the merits of an AMR-US Airways merger," he said.