The parent company of America West Airlines surprised most of Wall Street on Thursday with a 30 percent increase in second-quarter earnings despite fuel expenses that exceeded the cost of salaries and benefits for the only the second time in the company’s 22-year history.
America West Holdings Corp., which is planning to merge with ailing US Airways, reported a $13.9 million profit, or 29 cents per share, during the quarter compared with a profit of $10.7 million, or 20 cents per share, during the same time in 2004.
Excluding losses on fuel hedging transactions and the sale and leaseback of an aircraft, the Tempe-based airline posted profit of $20.9 million, or 41 cents per share, versus income of $3.5 million, or 7 cents per share, during the second quarter of 2004.
The results beat most analyst predictions. The consensus among analysts surveyed by Thomson Financial expected a profit of 13 cents per share. But Wall Street estimates had ranged widely from a loss of 15 cents per share to a profit of 35 cents.
America West chairman and CEO Doug Parker credited the company’s 14,000 employees for the results.
"We ran a very, very good airline," he said. "We were amongst the leaders in on-time performance every month of the quarter. Our employees did a great job of taking care of a record number of passengers at record load factors and they did so efficiently."
Passenger revenue increased nearly 12 percent compared with the same period last year, but it was offset by a more than 12 percent increase in operating expenses caused by a 4 3 percent increase in fuel costs compared with the second quarter of 2004.
America West finished the quarter with $413 million in cash and short-term investments, more than it had previously thought.
The planned merger with ailing US Airways is proceeding well, Parker said, adding the company was holding its conference call with the media Thursday from US Airways’ boardroom in Virginia as the two sides worked on integrating the companies.
The company received $565 million of equity commitments and the transaction has received Department of Justice Department approval. America West stock has more than doubled since the announcement was made in May.
The merger is expected to close in late September or early October, Parker said.
Second-quarter revenue climbed 20 percent to $833 million from $694.2 million last year, and passenger traffic rose 8 percent to a record 6.4 billion revenue passenger miles on a 2.7 percent jump in capacity. Load factor, or the percentage of seats filled with paying passengers, improved to 82.3 percent from 78.3 percent last year.
America West executives said they lead the industry in year-over-year passenger revenue during the quarter because capacity is slowing thanks to high fuel costs, and the carrier is getting rid of unprofitable transcontinental flights.
The airline also said there is a strong demand for leisure travel, and its policy of not matching the lowest fares on peak days is working to increase revenue.
Going forward, the revenue outlook is positive because of multiple fare increases, fewer fare sales and Delta Airline’s decision to lift its cap on fares, said Scott Kirby, America West executive vice president of sales and marketing.
To capitalize on vacation travelers, America West will offer nonstop flights to four Hawaiian destinations beginning in December.