The parent company of Tempe-based America West Airlines surprised industry analysts by posting a $79.7 million profit during the second quarter, the first time the carrier has made money since September 2000.
Earnings amounted to $2.02 per diluted share, compared with a net loss $12.9 million, or 38 cents per share, during the same period last year.
The company's earnings in the period ended June 30 included an $81.3 million reimbursement from the federal government for security fees and $14.5 million in special charges due to the closing of the airline's Columbus, Ohio, hub, a 30 percent reduction in management positions and the removal of three older Boeing 737s from service.
Excluding those items, America West Holdings Corp. earned $12.9 million, or 33 cents a share. Operating revenue was $575.8 million, up 5.8 percent from the year-ago period.
“These results are solid evidence that the transformation of America West Airlines has worked," said CEO Doug Parker. “In less than two years, we have separated ourselves from the ranks of struggling airlines and have joined a very small group of low-fare airlines that have been able to report profits despite the difficult economic times.” Parker said the company's pre-tax profit margins in 2002 were worse than United and US Airways, carriers that filed for bankruptcy.
Now, America West's margins are second only to Southwest among the major airlines, he said. Fares implemented more than a year ago have positioned the airline to become a low-cost carrier “as opposed to what we used to be which was a struggling airline that tried to charge $2,000 for people to fly from Phoenix to L.A.,” he said. The quarterly results surprised analysts who predicted the carrier would lose money for its eleventh straight quarter.
America West became only the third major U.S. airline to report quarterly profit excluding special items since the terrorist attacks of Sept. 11, 2001.
Analysts surveyed by Thomson First Call had expected the airline to lose 19 cents per share.
During a conference call, several airline analysts congratulated the airline for its recent performance.
“When you listen to your comments you get the sense you're an airline serving a completely different planet than Earth,” said Mike Linenberg with Merrill Lynch, who had expected America West to post a loss of 40 cents per share.
Parker credited employees for “running a great airline,” and for turning around the carrier's operations.
America West's on-time performance during the second quarter, which ended June 30, was 86 percent, Parker said. The carrier had a 99.7 percent completion factor, the number of flights scheduled versus the number of flights operated.
The new fares provide business and leisure travelers with inexpensive tickets when they purchase them just days before travel, the company said.
The carrier said it was particularly pleased with its passenger revenue per available seat mile, which improved 4.2 percent in the quarter and more than 10 percent in June. Also known as unit revenue, the revenue per available seat mile represents how much a carrier makes spread across all of its available seats.
The company predicted unit revenue will be higher in July and August than at any other time in the company's 20-year history. Its operating cost per available seat mile excluding special charges declined 1.3 percent from the second quarter 2002 despite a 16 percent increase in fuel prices. The company's cash and short-term investments totaled $465 million — $80 million of which is restricted.
The second quarter is traditionally the industry's strongest, and Parker said posting a profit in the next quarter would require significant improvement over the second quarter results.
Unit revenue for domestic airlines typically decreases 5 percent in the third quarter because of seasonal travel fluctuations, he said. But the company's revenue outlook continues to be bright, he said. “We expect to be profitable again, excluding these special charges, in the third quarter 2003, but it's going to require some continued improvement and therefore it's going to be close,” he said.
Besides America West, Alaska Airlines on Tuesday reported a second-quarter profit of $45.2 million excluding one-time items. The turnaround for both followed good news Monday from Southwest Airlines, which reported its 49th-consecutive quarterly profit.
‘‘We expect all the discount carriers to reach this milestone of profitability’’ in the second quarter, said Blaylock & Partners airline analyst Ray Neidl.
Unlike Southwest, however, America West and Alaska Airlines are not expected to sustain profitability without the benefit of summer-travel demand and the government aid program, which ends in September.
Shares of America West were down 5 cents to close at $9.13 on the New York Stock Exchange.