Boost in fliers, fares lifts airlines’ profits
MINNEAPOLIS — United Continental, Southwest, and JetBlue all reported strong third-quarter profits yesterday as more people flew and paid more to fly.
Because of that, airlines are restoring some of the flights they cut during the recession. The trick will be to resist adding so many flights it kills their profits. They want to meet rising demand without offering so many seats they have to resort to discounts to fill them.
United Continental Holdings Inc., for instance, said capacity will grow 3 percent to 4 percent during the fourth quarter. It said most of that will be restoring flights cut a year ago. Its capacity should grow no more than 2 percent next year.
“We will not grow for growth’s sake, but only if we can maximize our profitability by doing so,’’ president and chief executive Jeff Smisek said on a conference call.
JetBlue said fourth-quarter capacity will rise up to 10 percent as it continues to add flights in Boston and the Caribbean. Delta Air Lines Inc. said on Wednesday that fourth-quarter capacity will rise 5 percent to 7 percent, mostly on international flights, which it reduced sharply a year ago.
Still, most of the airlines saw traffic rise even faster than capacity in September suggesting they have enough business to support the additional flights.
Airlines have been downplaying the flights they’ve added, but “the reality is, we’re seeing capacity increases,’’ said Helane Becker, airline analyst at Dahlman Rose & Co.
The airlines suggested that demand is stronger than usual for fall, ordinarily a slow travel season. Ray Neidl, an analyst for Maxim Group, said he thinks the industry rebound will last beyond that.
“I think this is a little more long term,’’ he said. Referring to 2011, he said, “Despite the lackluster economy, it’s going to be a big year for airlines, especially as consolidation kicks in.’’
Chicago-based United Continental will have its hands full with or without adding flights. It is working to combine United and Continental airlines into what will be the world’s largest carrier. Smisek said he hopes to have a single certificate, allowing both airlines to fly as one, from the Federal Aviation Administration by the end of next year. The combined airline will be called United Airlines.
The most recent quarter was the last one for United and Continental as standalone airlines. United posted a $387 million profit, or $1.75 per share. A year earlier it lost $57 million. Continental’s profit was $354 million, or $2.16 per share, after losing $18 million a year earlier.
Discounters Southwest Airlines Co. and JetBlue Airways Corp. also benefited from more passengers and higher fares.
Southwest reported net income of $205 million for the quarter and said traffic rose 5 percent. The higher traffic and average fares pushed revenue up 20 percent to $3.19 billion.
Chief executive Gary Kelly said the outlook for October is excellent.
He predicted revenue per passenger will rise in the fourth quarter even though that’s usually a slow period for travel, other than the December holidays.
JetBlue earned $59 million, or 18 cents per share, for the quarter. Revenue rose 21 percent to $1.03 billion, which is what analysts expected, although per-share profit was a penny short.
