WSJ: Kuwait calls in Ms. Roumi to turn around Kuwait Airways

Kuwait Airways (Kuwait City) has a new CEO. Ms. Rasha Al Roumi, 52, has been selected by the Kuwait government to turn around the flag carrier according to the Wall Street Journal (WSJ).

Read the full report: CLICK HERE

Copyright Photo: Dave Glendinning/AirlinersGallery.com. The Boeing 777-200 ERs are being phase out as the airline becomes an all-Airbus airline. Boeing 777-269 ER 9K-AOB (msn 28744) taxies to the gate at London Heathrow Airport (LHR).

Kuwait Airways: AG Slide Show

 

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UPS produces an operating profit of $1.5 billion in the first quarter, down $106 million due to harsh winter weather

UPS (United Parcel Service) (UPS Airlines) (Atlanta) today released first quarter 2014 results. Diluted earnings per share totaled $0.98, a $0.06 decline from first quarter 2013 adjusted results. Operating profit for the quarter was $1.5 billion, down $106 million from the prior-year’s adjusted results. Unusually harsh weather weighed on operating profit by approximately $200 million, due to increased expenses and slower revenue growth. Average daily shipments in the U.S. climbed 4.2% driven primarily by large e-commerce shippers using lightweight deferred shipping solutions.

The International segment operating margin expanded to 14.0% on daily volume growth of 7.9%. Supply Chain and Freight experienced improved operating profit and margin expansion.

For the first quarter of 2013, UPS reported diluted earnings per share of $1.08, which includes $36 million in after-tax gains related to the attempted acquisition of TNT.

“Much of the U.S. economy was negatively affected by the severe weather conditions in the first quarter, resulting in lower UPS operating results versus the prior year,” said Scott Davis, UPS chairman and CEO. “International and the Supply Chain and Freight segment benefitted from positive momentum during the quarter as customers utilized the strategic investments made by UPS to strengthen our portfolio.”

Cash Flow

For the three months ended March 31, UPS generated $1.9 billion in free cash flow. The company paid dividends of $596 million, up 8.1% per share over the prior year, and repurchased 6.8 million shares for approximately $660 million.

U.S. Domestic Package

U.S. Domestic revenue increased 2.6% over the prior-year period, to $8.5 billion. Daily volume improved 4.2%, led by UPS SurePost and UPS Second Day Air.

The segment generated $927 million in operating profit, down $158 million compared to the prior year, due to the impact of severe winter weather. The company experienced lost revenue and additional cost as a result of significant network disruptions on more than half of the operating days during the quarter. Overtime wages, purchased transportation and snow removal costs increased substantially over the prior year. Operating margin contracted 220 basis points to 10.9%.

Revenue per package declined 1.5% from the previous year due to changes in customer and product mix, as well as lower fuel surcharges. Product mix continues to be impacted by the rapid increase of UPS SurePost. More e-commerce retailers are choosing this product to serve their value-conscious customers.
International Package

The International segment revenue improved 5.0% and produced operating profit of $438 million, 12% more than the prior-year adjusted results. Operating margin expanded to 14% driven by improved network efficiency and in-country leverage.

On a reported basis, the segment recorded operating profit growth of 24% more than the prior-year result of $352 million. This reflects the operating profit impact of a $39 million net charge in 2013, related to the attempted acquisition of TNT.

Export shipments climbed 7.7% driven by 15% growth in Europe and modest gains in Asia and the Americas. Transborder shipments in Europe continue to expand rapidly as customers migrate to Pan-European distribution using UPS solutions.

To support strong Intra-European growth and intercontinental trade, the company announced the completed expansion of its Cologne, Germany, air hub. This $200 million investment increased facility capacity by 70%.
Non-U.S. Domestic deliveries increased 8.1%, driven by growth in Europe and Canada. Poland led the European countries with more than 20% growth, while Germany and the U.K. contributed strong gains.

Average revenue per package declined 2.1% due to product mix changes as non-premium Export products jumped almost 13%, overshadowing improved growth in premium products.

Supply Chain & Freight

Supply Chain and Freight operating profit increased 3.5% to $148 million. Operating margin expanded 30 basis points to 6.8%, driven by gains in the Forwarding and Distribution units.

The Forwarding business delivered improved operating profit and margin gains during the quarter as the unit adapted to market changes. International Air Freight growth in shipments and tonnage were offset by lower revenue per pound. Ocean Freight and Brokerage showed both improved revenue and operating profit.
Gains from retail and healthcare customers drove higher revenue growth in the Distribution business unit.

Operating profit improved more than 10% despite additional expansion costs during the quarter.

UPS Freight revenue increased slightly on a 3.1% increase in LTL revenue per hundredweight. Both tonnage and operating profit were negatively impacted by the severe winter weather.

Outlook

“During the quarter, the momentum of the underlying business was masked by the disruption of inclement weather,” said Kurt Kuehn, UPS chief financial officer. “We are encouraged by the positive trends in our business and expect the remainder of the year to perform as we originally guided. However, due to the challenging start to 2014, we anticipate diluted earnings per share to be at the low end of our full-year guidance range of $5.05 to $5.30.”

Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 767-34AF ER N328UP (msn 27754) in Blended Winglets prepares to land at Philadelphia International Airport (PHL).

UPS Airlines: AG Slide Show

 

Greenland Express to commence operations on June 2

Greenland Express 4.2014 Route Map

Greenland Express will start scheduled passenger operations using a wet-leased 100-seat Fokker 100 from Denim Air on June 2 on the routes above. The first Fokker 100 will be delivered in late May and will be flown in Greenland Express colors. The wet-lease is for three years. Previously the new airline had looked at Airbus and Embraer aircraft but settled on this current arrangement.

Greenland Express - Denim Air logos

 

Southwest Airlines Company reports record first quarter net profit of $126 million

Southwest Airlines Company (Southwest Airlines and AirTran Airways) (Dallas) today reported its first quarter 2014 results:

Record first quarter net income, excluding special items*, of $126 million, or $.18 per diluted share, compared to first quarter 2013 net income, excluding special items, of $53 million, or $.07 per diluted share. This exceeded the First Call consensus estimate of $.16 per diluted share.

Record first quarter net income of $152 million, or $.22 per diluted share, which included $26 million (net) of favorable special items, compared to net income of $59 million, or $.08 per diluted share, in first quarter 2013, which included $6 million (net) of favorable special items.

Record first quarter operating income of $215 million; $242 million excluding special items.
Return on invested capital*, before taxes and excluding special items (ROIC), for the 12 months ended March 31, 2014, of 14.2 percent, as compared to 8.3 percent for the 12 months ended March 31, 2013.

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “I am delighted to report record first quarter earnings, which increased significantly year-over-year, despite the disruption caused by more than 7,500 of our flights canceled due to extreme weather conditions and the impact of the shift in timing of the Easter and Passover holidays. This outstanding performance was driven by record first quarter operating revenues of $4.2 billion, and a 1.2 percent year-over-year decline in total operating costs, excluding special items, driven largely by lower fuel prices and our ongoing fleet modernization. Our record first quarter operating income of $242 million, excluding special items, was very strong, especially considering an estimated $50 million unfavorable impact from winter storms. Operationally, our Employees did an outstanding job in difficult conditions taking care of our Customers, and I thank them again for their efforts.

“Our first quarter 2014 earnings performance is a superb start to the year and on plan to achieve a 15 percent pre-tax return on invested capital for the year, excluding special items. Second quarter 2014, benefiting from the Easter and Passover holidays, also is off to a great start, with strong bookings, favorable revenue trends, and stable fuel prices.

“Our balance sheet, liquidity, and cash flows remain strong. We are actively managing our debt and total invested capital, while making strategic investments that have already contributed significantly to our record profitability. We were pleased to return $371 million to Shareholders during first quarter 2014 through the payment of $56 million in dividends and the repurchase of $315 million in common stock. Since August 2011, we have returned $1.6 billion to our Shareholders through share repurchases and dividend payments.

“Our five strategic initiatives are on track and meeting or exceeding expectations. In January, we deployed our international reservation system and began selling Southwest’s inaugural international service to Aruba, The Bahamas, and Jamaica, scheduled to begin July 1, 2014. We quickly followed with selling Southwest service to Cancun and Los Cabos, scheduled to begin August 10, 2014. By the end of this year, we intend to fully convert AirTran’s seven international markets, along with its remaining domestic markets, to the Southwest route network. We have converted 21 of the 52 AirTran Boeing 737-700s to the Southwest Evolve configuration, and plan to convert the remaining 31 -700s this year (see below). This will complete the AirTran integration and retire the brand by the end of 2014.

“We have a significant amount of fleet activity planned this year, as we wind down the AirTran brand and continue to modernize our fleet, resulting in a larger than normal number of aircraft out of scheduled service. Accordingly, we expect relatively flat 2014 available seat miles, year-over-year.

“Our network development and optimization results, to date, have been excellent. We are excited about the opportunity to add new service to New York LaGuardia, Washington Reagan National, and Dallas Love Field this year, as well as to the international terminal under construction at Houston Hobby next year. Looking ahead to 2015, while we have not finalized our fleet and capacity plans, we have been managing to a baseline of 695 aircraft, which was our combined fleet at the time of the AirTran acquisition. We are planning year-over-year growth in our available seat miles derived from increased fleet utilization resulting from the completion of the AirTran integration and the increase in seats from the upgauging of our fleet. Of course, this will drive significant unit cost benefits.”

Financial Results and Outlook

The Company’s first quarter 2014 total operating revenues increased 2.0 percent, year-over-year, to $4.2 billion, despite an estimated $45 million reduction to revenues from weather-related cancellations. Operating unit revenues increased 3.1 percent, on a 1.1 percent decrease in available seat miles and a 2.6 percent increase in average seats per trip, all as compared to first quarter 2013. While the shift in the timing of the Easter and Passover holidays impacted March results, April bookings and revenue trends, thus far, are strong. Based on April’s trends and current bookings for the remainder of the second quarter, the Company expects another solid year-over-year increase in its second quarter 2014 operating unit revenues.

Total operating expenses in first quarter 2014 decreased 1.6 percent to $4.0 billion, as compared to first quarter 2013. First quarter 2014 total operating expenses included an estimated $5 million in net costs associated with winter storms. The Company incurred costs (before profitsharing and taxes) associated with the acquisition and integration of AirTran, which are special items, of $18 million during first quarter 2014, compared to $13 million in first quarter 2013. Cumulative costs associated with the acquisition and integration of AirTran, as of March 31, 2014, totaled $428 million (before profitsharing and taxes). The Company expects total acquisition and integration costs to be no more than $550 million (before profitsharing and taxes). Excluding special items in both periods, total operating expenses in first quarter 2014 decreased 1.2 percent to $3.9 billion, as compared to $4.0 billion in first quarter 2013.

First quarter 2014 profitsharing expense was $29 million, compared to $15 million in first quarter 2013. Profitsharing expense in first quarter 2014 was impacted by acquisition and integration costs incurred during that period. In addition, in accordance with the Company’s ProfitSharing Plan (the Plan), first quarter 2014 operating profit, as defined in the Plan, was reduced by a portion of the acquisition and integration costs incurred from April 1, 2011, through December 31, 2013, which will be amortized from January 1, 2014, through December 31, 2018.

First quarter 2014 economic fuel costs were $3.08 per gallon, including $.06 per gallon in favorable cash settlements from fuel derivative contracts, compared to $3.29 per gallon in first quarter 2013, including $.05 per gallon in unfavorable cash settlements from fuel derivative contracts. Based on the Company’s fuel derivative contracts and market prices as of April 21, 2014, second quarter 2014 economic fuel costs are expected to be comparable to second quarter 2013′s economic fuel costs of $3.06 per gallon. As of April 21, 2014, the fair market value of the Company’s hedge portfolio through 2017 was a net asset of approximately $252 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding economic fuel and oil expense, profitsharing, and special items in both periods, first quarter 2014 operating costs increased 2.4 percent from first quarter 2013, and increased 3.5 percent on a unit basis. Based on current cost trends, the Company expects both second quarter 2014 and full year 2014 unit costs, excluding fuel and oil expense, profitsharing, and special items, to increase, year-over-year, in the two to three percent range.

Operating income for first quarter 2014 was $215 million, compared to $70 million in first quarter 2013. Excluding special items, operating income was $242 million in first quarter 2014, compared to $112 million in the same period last year.

Other income in first quarter 2014 was $29 million, compared to $24 million in first quarter 2013. The $5 million increase primarily resulted from $53 million in other gains recognized in first quarter 2014, compared to $46 million recognized in first quarter 2013. In both periods, these gains primarily resulted from unrealized mark-to-market net gains associated with a portion of the Company’s fuel hedging portfolio, which are special items. Excluding these special items, first quarter 2014 had $16 million in other losses, compared to $5 million in first quarter 2013, primarily attributable to the premium costs associated with the Company’s fuel derivative contracts. Second quarter 2014 premium costs related to fuel derivative contracts are currently estimated to be in the $15 million to $20 million range, compared to $12 million in second quarter 2013. Net interest expense in first quarter 2014 was $24 million, compared to $22 million in first quarter 2013.

Balance Sheet and Cash Flows

As of April 23, 2014, the Company had approximately $3.5 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion. Net cash provided by operations during first quarter 2014 was $1.1 billion, and capital expenditures were $407 million, which included the payment for slots acquired at Washington’s Reagan National Airport. The Company repaid $46 million in debt and capital lease obligations during the first quarter 2014, and intends to repay approximately $500 million in debt and capital lease obligations during the remainder of 2014, which includes $35 million paid on April 1, 2014, associated with eight of the Company’s Fixed-rate Boeing 717 Aircraft Notes due in 2017.

During first quarter 2014, the Company generated free cash flow* of $712 million. The Company returned approximately $371 million to its Shareholders through the payment of $56 million in dividends and the repurchase of $315 million in common stock, or 12 million shares, under its share repurchase program, including $200 million under an accelerated share repurchase program with a third party financial institution. In first quarter, pursuant to the accelerated share repurchase program, the Company advanced $200 million to the financial institution and received approximately seven million shares of the Company’s common stock, representing an estimated 75 percent of the shares the Company expects to purchase under the accelerated share repurchase program. The specific number of shares that the Company ultimately will repurchase under the accelerated share repurchase program will be determined generally based on a discount to the volume-weighted average price per share of the Company’s common stock during a calculation period to be completed by May 9, 2014. At settlement, under certain circumstances, the third party financial institution may be required to deliver additional shares of common stock to the Company, or under certain circumstances, the Company may be required to deliver shares of its common stock or may elect to make a cash payment to the third party financial institution. Since August 2011, the Company has repurchased $1.48 billion in common stock, or 124 million shares, under its $1.5 billion share repurchase authorization.

Fleet

During first quarter 2014, the Company’s fleet was reduced by five to 676 aircraft at period end. This reflects the first quarter 2014 delivery of two new Boeing 737-800s and six pre-owned Boeing 737-700s, as well as the retirement of one Boeing 737-300. In addition, the Company removed 12 Boeing 717-200s from service during first quarter 2014 in preparation for transition. Additional information regarding the Company’s aircraft delivery schedule is included in the accompanying tables.

Southwest 737-700 Fleet Table

Top Copyright Photo: Brian McDonough/AirlinersGallery.com. Southwest’s Boeing 737-7H4 N214WN (msn 32486) completes its final turn on the river approach into Washington’s Reagan National Airport (DCA).

Southwest Airlines: AG Slide Show

AirTran Airways: AG Slide Show

Bottom Copyright Photo: Ton Jochems/AirlinersGallery.com. AirTran’s Boeing 737-7BD N315AT (msn 35788) completes its final approach to the runway at Los Angeles International Airport (LAX).

 

American Airlines Group reports a record first quarter net profit of $480 million

American Airlines Group (American Airlines and US Airways) (Dallas/Fort Worth) today reported its first quarter 2014 results.

First quarter 2014 net profit was a record $480 million. This represents a $777 million improvement versus the company’s combined first quarter 2013 net loss of $297 million.

Excluding net special credits, the company reported a record first quarter net profit of $402 million. This represents a $340 million year-over-year improvement versus the company’s combined net profit of $62 million excluding net special charges in the first quarter 2013.

First quarter 2014 pretax margin excluding net special credits was 4.1 percent, a 3.6 point year-over-year improvement.

The company ended the quarter with $10.6 billion in total cash and short-term investments. Since the close of the merger, the company has used more than $542 million of cash to reduce its diluted shares outstanding by approximately 20 million.

For the first quarter 2014, American Airlines Group reported a record GAAP net profit of $480 million. This compares to a net loss of $341 million in the first quarter 2013. The company’s GAAP results for the first quarter 2013 reflect AMR Corporation prior to the merger.

The company believes it is more meaningful to compare year-over-year results for American Airlines and US Airways on a combined basis, which is a non-GAAP formulation that combines the results for AMR Corporation and US Airways Group. Therefore, it includes the results of US Airways Group for the full period. See the accompanying notes in the Financial Tables section of this press release for further explanation of this presentation, including a reconciliation of GAAP to non-GAAP financial information.

First quarter 2014 net profit excluding net special credits was a record $402 million. This compares to a combined non-GAAP net profit of $62 million excluding net special charges for the same period in 2013. Excluding net special credits, first quarter 2014 diluted earnings per share was $0.54.

“We are very pleased to report a record profit in our first full quarter as a merged company,” said Doug Parker, CEO of American Airlines Group. “Our team of dedicated professionals did an excellent job of taking care of our customers despite particularly difficult weather conditions throughout the quarter. We are excited for the future and expect our synergies to build as we continue to integrate our operations.”

Merger Integration

Since closing the merger on December 9, 2013, the company has made significant progress in integrating American Airlines and US Airways. Key accomplishments:

Launched the world’s largest codeshare, offering customers improved access to the company’s global network by allowing them to book flights on both airlines’ networks

Provided reciprocal benefits for airport lounge and frequent flyer elite members, including priority check-in, waiving fees for checked bags, complimentary access to preferred seats, priority security lines, early boarding and priority baggage delivery

Enabled AAdvantage® and Dividend Miles® members to earn and redeem miles when traveling across either airline’s network

Joined operations at 58 airports, including Phoenix and Miami hubs

Moved US Airways into the oneworld alliance on March 31 and to the trans-Atlantic joint venture with American, British Airways, Iberia and Finnair on April 3

Aligned award travel options, checked baggage policies and inflight services for First and Business Class customers

Announced Sabre as the new Passenger Services System for the combined company

Closed the sale of the slot divestitures required by the U.S. Department of Justice at Ronald Reagan Washington National Airport (DCA). In total, the company received $381 million in cash from the DCA sales and the sale of slots at New York’s LaGuardia (LGA) Airport, which closed in the fourth quarter 2013.

Revenue and Cost Comparisons

On a combined basis, total revenues in the first quarter were a record $10 billion, up 5.6 percent versus the first quarter 2013 on a 2.0 percent increase in total available seat miles (ASMs). Driven by a record yield of 17.03 cents, up 3.2 percent year-over-year, combined consolidated passenger revenue per ASM (PRASM) was also a record for the first quarter at 13.67 cents, up 2.9 percent versus the first quarter 2013.

Total combined operating expenses in the first quarter were $9.3 billion, down 0.3 percent over first quarter 2013. Combined first quarter mainline cost per available seat mile (CASM) was 13.50 cents, down 2.7 percent on a 2.7 percent increase in mainline ASMs versus first quarter 2013. This cost improvement was largely due to a 4.8 percent decrease in year-over-year mainline fuel prices. Excluding special charges, fuel and profit sharing, mainline CASM was up 4.0 percent compared to the first quarter 2013, at 8.96 cents. Regional CASM excluding special charges and fuel was 16.62 cents, up 5.0 percent on a 3.2 percent decrease in regional ASMs versus first quarter 2013.

Liquidity

As of March 31, 2014, American had approximately $10.6 billion in total cash and short-term investments, of which $947 million was restricted. The company also has an undrawn revolving credit facility of $1.0 billion. Approximately $750 million of the company’s unrestricted cash balance was held in Venezuelan bolivars, valued at the weighted average applicable exchange rate of 6.32 bolivars to the dollar. This includes approximately $94 million valued at 4.3 bolivars, approximately $611 million valued at 6.3 bolivars and approximately $45 million valued at 10.7 bolivars, with the rate depending on the date the company submitted its repatriation request to the Venezuelan government.

In the first quarter of 2014, the Venezuelan government announced that a newly-implemented system (SICAD I) will determine the exchange rate (which fluctuates as determined by weekly auctions and at March 31, 2014 was 10.7 bolivars to the dollar) for repatriation of cash proceeds from ticket sales after January 1, 2014, and introduced new procedures for approval of repatriation of local currency. The company is continuing to work with Venezuelan authorities regarding the timing and exchange rate applicable to the repatriation of funds held in local currency. The company is monitoring this situation closely and continues to evaluate its holdings of Venezuelan bolivars for potential impairment.

Since the merger, the company paid $542 million in tax withholdings for employees in lieu of issuing shares of common stock as compensation as permitted under the Plan of Reorganization, thereby reducing the number of shares expected to be issued under the Plan by approximately 20 million. Additionally, the company has elected to utilize the cash settlement feature for the remaining $22 million principal amount of US Airways Group 7.25% convertible notes due May 15, 2014, which will further reduce diluted shares by approximately 4 million shares.

Special Items

In the first quarter, the company recognized a combined total of $78 million in net special credits, including:

$137 million in net special credits consisting primarily of the gain on the sale of slots at Reagan National Airport offset in part by integration and merger-related expenses

$47 million in non-operating special charges due primarily to non-cash interest accretion on bankruptcy settlement obligations

$8 million in non-cash deferred income tax provision related to certain indefinite-lived intangible assets

$4 million in regional non-operating charges

Additional Integration Related Developments

Distributed $11 million to employees for baggage handling and on-time performance in the month of January; this distribution of $100 per employee is part of the company’s Triple Play program which measures on-time arrivals and baggage performance as reported in the DOT’s Air Travel Consumer Report (ATCR)

Conducted first joint Captain Leadership Training with newly promoted captains from both airlines

On April 9, Piedmont flight attendants ratified a new five-year Collective Bargaining Agreement
Opened a new Admirals Club lounge at the company’s Philadelphia (PHL) hub

Fleet/Network Developments

As part of its plan to modernize its fleet by replacing older aircraft with newer, more fuel-efficient aircraft, the company inducted 12 new Airbus A321 aircraft into service between New York’s John F. Kennedy International Airport (JFK) and Los Angeles International Airport (LAX), and JFK and San Francisco International Airport (SFO). American is now the only U.S. carrier to offer three classes of service between these key markets.

The company also took delivery of one Airbus A330-200 aircraft, five Boeing 737-800 aircraft and one Boeing 777-300 aircraft during the first quarter.

Revealed new Boeing 767-300 and 777-200ER cabin retrofits, which feature lie-flat seats with direct aisle access in Business Class

In April 2014, the company exercised its option to purchase (and thus terminated its existing lease financing arrangements) for 62 Airbus A320 family aircraft scheduled to be delivered between first quarter 2015 and third quarter 2017. In connection with this decision, the company also exercised its right to convert firm orders for 30 Airbus A320 family NEO aircraft (scheduled to be delivered in 2021 and 2022) to options to acquire such aircraft.

Top Copyright Photo: Rolf Wallner/AirlinersGallery.com. American Airlines’ Boeing 767-323 ER N346AN (msn 33085) taxies at Zurich.

American Airlines: AG Slide Show

US Airways: AG Slide Show

Bottom Copyright Photo: Jay Selman/AirlinersGallery.com. US Airways is now planning to operate the last Boeing 737 revenue flight on August 18 at the Charlotte hub. Boeing 737-4B7 N450UW (msn 24933) arrives back at CLT.

 

United Airlines reports a first quarter net loss of $489 million

United Airlines (Chicago) today reported a first quarter 2014 net loss of $489 million, or $1.33 per share, excluding $120 million of special items. Including special items, UAL reported a first quarter 2014 net loss of $609 million, or $1.66 per share.

Historic severe weather increased United’s first quarter loss by approximately $200 million.

United’s consolidated passenger revenue per available seat mile (PRASM) decreased 2.0 percent in the first quarter of 2014 compared to the first quarter of 2013. Weather-related cancellations reduced first quarter 2014 consolidated PRASM by approximately 1.5 percentage points.

First quarter 2014 consolidated unit costs (CASM) increased 1.0 percent year-over-year. First-quarter 2014 consolidated CASM, excluding special charges, third-party business expenses, fuel and profit sharing, increased 3.1 percent year-over-year on a consolidated capacity reduction of 0.3 percent.

UAL ended the first quarter with $6.0 billion in unrestricted liquidity.

“This quarter’s financial performance is well below what we can and should achieve. We are taking the appropriate steps with our operations, network, service and product to deliver significantly better financial results,” said Jeff Smisek, UAL’s chairman, president and chief executive officer. “The entire United team is sharply focused on accomplishing the goals we have laid out for long-term financial success.”

First Quarter Revenue and Capacity

For the first quarter of 2014, total revenue was $8.7 billion, a decrease of 0.3 percent year-over-year. First-quarter consolidated passenger revenue decreased 2.3 percent to $7.4 billion, compared to the same period in 2013. Ancillary revenue per passenger in the first quarter increased 7.6 percent year-over-year to more than $21 per passenger. First-quarter cargo revenue decreased 7.9 percent versus the first quarter of 2013 to $209 million. Other revenue in the first quarter increased 18.0 percent year-over-year to $1.1 billion, in large part due to an agreement to sell jet fuel to a third party.

Consolidated revenue passenger miles and consolidated available seat miles each decreased 0.3 percent year-over-year for the first quarter, driven largely by adverse weather, resulting in a first quarter consolidated load factor of 81.1 percent.

First quarter 2014 consolidated PRASM and consolidated yield each decreased 2.0 percent compared to the first quarter of 2013.

“We recognize that we have lagged on revenue and are taking the necessary actions to remedy that,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “Our employees pulled together during the unprecedented extreme winter weather that marked this quarter. We appreciate their hard work, which resulted in higher customer satisfaction scores than for the same period last year.”

First Quarter Costs

Total operating expenses increased $60 million, or 0.7 percent, in the first quarter versus the same period in 2013. Excluding special charges, first-quarter total operating expenses increased $100 million, or 1.1 percent, year-over-year.

First quarter consolidated CASM increased 1.0 percent year-over-year. First quarter consolidated CASM, excluding special charges, third-party business expense, fuel and profit sharing, increased 3.1 percent compared to the first quarter of 2013. Third-party business expense was $193 million in the first quarter of 2014.

“We are making good progress in reducing costs and delivering sustainable efficiencies, all while improving the product for our customers,” said John Rainey, UAL’s executive vice president and chief financial officer. “While we are not pleased with our first-quarter financial results, we are building a strong foundation that will result in improved financial performance.”

Liquidity and Cash Flow

UAL ended the first quarter with $6.0 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under a revolving credit facility. The company generated $694 million of operating cash flow in the first quarter. During the first quarter, the company had gross capital expenditures of $737 million, excluding fully reimbursable projects. The company made debt and capital lease principal payments of $637 million in the first quarter.

Copyright Photo: Rolf Wallner/AirlinersGallery.com. Boeing 767-424 ER N76064 (msn 29459) touches down at Zurich.

United Airlines (current): AG Slide Show

JetBlue Airways Corporation reports first quarter net income of only $4 million

JetBlue Airways Corporation (JetBlue Airways) (New York) today reported its results for the first quarter 2014:

Operating income of $41 million in the first quarter. This compares to operating income of $59 million in the first quarter of 2013.

Pre-tax income of $6 million in the first quarter. This compares to pre-tax income of $23 million in the first quarter of 2013.

Net income for the first quarter was $4 million, or $0.01 per diluted share. This compares to JetBlue’s first quarter 2013 net income of $14 million, or $0.05 per diluted share.

“Today, we reported our sixteenth consecutive quarter of profitability,” said Dave Barger, JetBlue’s Chief Executive Officer. “While first quarter results were negatively impacted by severe winter weather in the Northeast, we believe our maturing network in high-value geography together with our differentiated product and service will help JetBlue expand margins and improve shareholder returns in 2014.”

Operational Performance

JetBlue reported record first quarter operating revenues of $1.3 billion despite severe winter weather in the Northeast. JetBlue cancelled 4,100 flights during the quarter, which reduced revenue by an estimated $50 million and reduced operating income by approximately $35 million. Revenue passenger miles for the first quarter increased 1.8% to 8.7 billion on a capacity increase of 2.7%, resulting in a first quarter load factor of 83.1%, a decrease of 0.8 points year over year.

Yield per passenger mile in the first quarter was 14.20 cents, up 1.8% compared to the first quarter of 2013. Passenger revenue per available seat mile (PRASM) for the first quarter 2014 increased 0.9% year over year to 11.80 cents and operating revenue per available seat mile (RASM) increased 1.1% year over year to 12.95 cents. The shift of the Easter and Passover holidays from March last year to April this year negatively impacted first quarter year over year PRASM by approximately three points.

“We achieved year over year improvements in yield and fare while growing capacity — demonstrating the core strength of our business,” said Robin Hayes, JetBlue’s President. “With a solid demand environment and continued focus on ancillary revenue initiatives, we expect year over year unit revenue growth to accelerate in the second quarter.”

Operating expenses for the quarter increased 5.5%, or $68 million, over the prior year period. Interest expense for the quarter declined 8.3%, or $4 million, due to JetBlue’s focus on debt reduction. JetBlue’s operating expense per available seat mile (CASM) for the first quarter increased 2.6% year over year to 12.55 cents. Excluding fuel and profit sharing, CASM increased 6.3% to 8.10 cents driven mainly by capacity reductions and higher non-fuel operating expenses associated with severe winter weather.

Fuel Expense and Hedging

JetBlue continued to hedge fuel to manage price volatility. Specifically, during the first quarter JetBlue hedged approximately 16% of its fuel consumption and managed approximately 8% of its fuel consumption using fixed forward price agreements (FFPs). This resulted in a realized fuel price of $3.14 per gallon, a 4.4% decrease over first quarter 2013 realized fuel price of $3.29. JetBlue recorded $1 million in losses on fuel hedges that settled during the first quarter.

JetBlue has managed approximately 22% of its second quarter projected fuel requirements using a combination of FFPs, jet fuel swaps and caps. Based on the fuel curve as of April 16th, JetBlue expects an average price per gallon of fuel, including the impact of hedges, FFPs and fuel taxes, of $3.11 in the second quarter.

Liquidity and Cash Flow

JetBlue ended the quarter with approximately $771 million in unrestricted cash and short term investments. In addition, JetBlue maintains $550 million in lines of credit.

During the first quarter, JetBlue repaid $237 million in debt and capital lease obligations. JetBlue plans to repay approximately $481 million in debt and capital lease obligations in 2014, including approximately $48 million in the second quarter.

JetBlue remains committed to improving its return on invested capital (ROIC) by an average of one percentage point per year. “We remain focused on growing unit revenues while maintaining our cost advantage and strengthening the balance sheet,” said Mark Powers, JetBlue’s Chief Financial Officer. “To that end, we plan to use the net proceeds from the pending sale of our wholly-owned subsidiary LiveTV to prepay debt and for other ROIC-accretive actions.”

Second Quarter and Full Year Outlook

For the second quarter of 2014, CASM is expected to be increase between 3.5% and 5.5% versus the year-ago period. Excluding fuel and profit sharing, CASM in the second quarter is expected to increase between 4.5% and 6.5% year over year.

CASM for the full year is expected to increase between 2.0% and 4.0% over full year 2013. Excluding fuel and profit sharing, CASM in 2014 is expected to increase between 3.5% and 5.5% year over year.

JetBlue expects approximately 1.5 points of this year over year unit cost increase to be driven by capacity reductions resulting from (1) reallocation of aircraft from longer haul routes to support new service in Washington Reagan National Airport and (2) first quarter weather-related cancellations.

Capacity is expected to increase between 5.5% and 7.5% in the second quarter. For the full year, capacity is expected to increase between 4.0% and 6.0%.

Copyright Photo: Mark Durbin/AirlinersGallery.com. Airbus A320-232 N615JB (msn 2461) in the FDNY special livery taxies at San Francisco International Airport (SFO).

JetBlue Airways: AG Slide Show

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