Monthly Archives: October 2012

Alaska Air Group reports net income of $163.4 million in the third quarter

Alaska Air Group, Inc. (Alaska Airlines and Horzon Air) (Seattle/Tacoma) reported third quarter 2012 GAAP net income of $163.4 million, or $2.27 per diluted share, compared to $77.5 million, or $1.06 per diluted share in 2011. Excluding the favorable impact of mark-to-market fuel hedge adjustments of $21.2 million ($13.1 million after tax, or $0.18 per diluted share), the company reported record third quarter 2012 net income of $150.3 million, or $2.09 per diluted share, compared to net income excluding special items of $131.1 million, or $1.79 per diluted share, in 2011.

Third quarter highlights with comparison to 2011:

Reported record third quarter net income, excluding special items, of $150.3 million, or $2.09 per diluted share, compared to adjusted net income of $131.1 million, or $1.79 per diluted share. This quarter’s results compare to a First Call mean estimate of $2.08 per share.
Earned net income under Generally Accepted Accounting Principles (GAAP) of $163.4 million, or $2.27 per diluted share, compared to net income of $77.5 million, or $1.06 per diluted share.
Held the No. 1 spot in U.S. Department of Transportation on-time performance among the 10 largest U.S. airlines for the 12 months ended August 2012.
Announced a new $250 million share repurchase program, representing approximately 10 percent of our market capitalization, while completing our previously announced $50 million share repurchase program.
Achieved trailing 12-month return on invested capital of 12.7 percent, compared to 12.0 percent in the 12 months ended Sept. 30, 2011.
Lowered adjusted debt-to-total capitalization ratio by 8 points, to 54 percent, since Dec. 31, 2011.
Held $1.2 billion in unrestricted cash and marketable securities as of Sept. 30, 2012.
Received “2012 Global Vision Award” by Travel + Leisure magazine for Alaska Airlines’ sustainability efforts.

New routes:

Began new service between Seattle and Fort Lauderdale, Fla.; Portland, Ore., and Washington, D.C.; and Seattle and San Antonio in the third quarter.
Announced expanded service between Los Angeles and Anchorage beginning in summer 2013.

Boeing order:

Signed an aircraft purchase agreement with Boeing for 50 new 737 aircraft, including 37 of Boeing’s new 737 MAX aircraft with deliveries expected in 2015 through 2024. This order positions Alaska to replace aging aircraft over the next decade and grow the fleet, assuming profitability and return-on-invested-capital targets can be met.

The following table reconciles the company’s reported GAAP net income and earnings per diluted share (EPS) during the third quarters of 2012 and 2011 to adjusted amounts:

	Three Months Ended September 30,
	2012				2011
(in millions, except per share amounts)	Dollars		Diluted EPS		Dollars		Diluted EPS
Reported GAAP net income	$	163.4	$	2.27	$	77.5	$	1.06
Fleet transition costs, net of tax	—		—		1.2		0.02
Mark-to-market fuel hedge adjustments, net of tax	(13.1)		(0.18)		52.4		0.71
Non-GAAP adjusted income and per share amounts	$	150.3	$	2.09	$	131.1	$	1.79

Copyright Photo: Nick Dean. Alaska Airlines’ Boeing 737-490 N791AS (msn 28886) decorated as “Follow Me to Disneyland/50 Years” completes its final approach into the Seattle/Tacoma hub.

All of the Horizon Air aircraft have now been rebranded as Alaska Horizon.

Alaska Airlines:

Alaska Horizon (Horizon Air):

The first Airbus A319 for Allegiant Air is painted, net income of $16.9 million in the 3Q

Allegiant Air‘s (Las Vegas) first Airbus A319 has been painted at Southend awaiting delivery.

In other news, the low-fare airline has cancelled all plans to operate Monterey-Honolulu service according to Airline Route.

On the financial side, the parent company issued the following statement for the third quarter:

Allegiant Travel Company has reported the following financial results for the third quarter 2012 as well as comparisons to prior year equivalents:

Unaudited	3Q12	3Q11	Change
Total operating revenue (millions)	$216.9	$191.5	13.2%
Operating income (millions)	$28.7	$16.7	71.8%
Operating margin	13.3%	8.7%	4.5pp
EBITDA (millions)	$44.6	$27.5	62.3%
EBITDA margin	20.6%	14.4%	6.2pp
Net income (millions)	$16.9	$9.5	78.6%
Diluted earnings per share	$0.87	$0.49	77.6%

“We are very proud to report our 39^th consecutive profitable quarter,” stated Maurice J. Gallagher, Jr., Chairman and CEO of Allegiant Travel Company. “I`d like to thank our Team Members for their great efforts and contributions to another successful quarter. The third quarter is typically our weakest quarter of the year, and yet we were able to produce the highest third quarter earnings per share in the company`s history. This is particularly noteworthy to have done this in a quarter with the average oil price at $92 per barrel and in a demand environment that has been slightly weaker than historical norms.”

Notable company highlights

Entered into a lease agreement with GECAS for nine Airbus A319 aircraft on August 27
Announced intention to acquire ten Airbus A319 aircraft from Cebu Pacific Air on July 30
Announced service to Honolulu from Boise, Idaho, Phoenix and Spokane, Wash. to begin in early February 2013
Announced the formation of Allegiant Systems, a joint venture with AvIntel and Lixar IT to develop and market a wide variety of mobile technology services to the commercial aviation industry
As of October 23, we have converted 40 MD-80s to 166 seat aircraft
Announced fifteen routes, in addition to Hawaii, expected to begin in the fourth quarter of 2012

Revenue performance

Average fare – ancillary air-related revenue per passenger has grown to $37.05 in the third quarter 2012, a $4.66 increase since the first quarter 2012
September average fare – ancillary air-related revenue per passenger has grown to $38.08, a $5.48 increase since March 2012
11^th consecutive quarter of year over year increases in total average fare

	3Q12	3Q11	Change
Scheduled Service:
Average fare – scheduled service	$82.30	$84.94	(3.1)%
Average fare – ancillary air-related charges	$37.05	$30.38	22.0%
Average fare – ancillary third party products	$5.59	$5.31	5.3%
Average fare – total	$124.94	$120.63	3.6%
Scheduled service passenger revenue per ASM (PRASM) (cents)	7.89	8.58	(8.0)%
Total scheduled service revenue* per ASM (TRASM) (cents)	11.98	12.19	(1.7)%
Load factor	90.1%	92.2%	(2.1)pp
Passengers (millions)	1.6	1.5	9.4%
Average passengers per departure	143	136	5.1%

* Total scheduled service revenue includes scheduled service, ancillary air-related, and ancillary third party revenue.

Copyright Photo: Keith Burton. Formerly operated by easyJet (Switzerland), Airbus A319-111 HB-JZK (msn 2319) is the first A319 for Allegiant Air. It is pictured after painting at a Southend, near London. The airframe will become N301NV on delivery.

Hot New Photos:

Allegiant Air:

Norwegian to make London Gatwick and Alicante new operational bases

Norwegian Air Shuttle (Norwegian.com) (Oslo) is upgrading its presence at both London (Gatwick) and Alicante to operational bases. The company issued this statement (translated from Norwegian):

In the spring of 2013 Norwegian establishes an additional European base, this time in London. The company will also establish a base in Alicante, Spain. From the base in London, Norwegian will offer a range of direct services to popular destinations around the Mediterranean and in the North. With the new base in England, the company will be well positioned to meet the competition from Asian and European airlines in the long distance market.

The new base is established at London Gatwick, where Norwegian is already a significant player. With more than 100 flights a week, is the company’s largest destination outside the Nordic region. Norwegian see a large passenger potential of several million travelers from London and surrounding areas. The base in Alicante will serve an important part of Norwegian’s Spanish production, similar to the already established bases in Malaga and Las Palmas.

The Company will place three Boeing 737-800 aircraft on the London base of the start-up phase, and then expand to four in the latter part of 2013. The first flights are planned for the summer 2013 program that starts at the beginning of april. Pilots and cabin crew recruited locally.

The background to the establishment is to position Norwegian facing future competition both on short-haul intra-European and long-haul market. Growth and volume necessary to be competitive in today’s international aviation industry. Growth must also be outside the region. While it is expected that the largest growth in traffic and tourist flows in the future come from Asia into Europe. Should we as a Scandinavian airlines remain competitive and at the same time take advantage of the huge traffic growth must now position itself in Europe and Asia, said Norwegian’s CEO Bjorn Kjos.

Norwegian currently has operational bases in Norway, Sweden, Denmark, Finland and Spain. A new base for Norwegian long-distance companies are being established in Bangkok.

On the financial side, the company issued this statement:

Norwegian reported a profit before tax of close to NOK 900 million. This is the company’s best quarterly results ever and an improvement of 187 million compared to the same period last year. New aircraft have saved the company 28 million NOK in fuel costs compared to the same quarter last year. The savings company itself offset by an extra bill of NOK 25 million as a result of a shortage of air traffic controllers in Norwegian Avinor.

In the third quarter, flew Norwegian nearly 5.2 million passengers. That’s 580,000 more than last year and also a new record for the company. The quarter was also characterized by a high load factor of 82 percent. Any passengers flew on average longer which is reflected in passenger traffic (RPK) increased by 17 percent in the third quarter, seat capacity (ASK) increased by 20 percent.

Norwegian Air Shuttle:

Wow Air acquires rival Iceland Express

Wow Air (stylized as WOW air) (Keflavik) yesterday (October 24) took control of all Iceland Express (Keflavik) flight operations and schedules. No disruption is expected for passengers booked on Iceland Express flights and Wow Air will ensure that all obligations to them are fulfilled.

The move is not a merger, it is a takeover, with Wow Air acquiring the Iceland Express route network, branding and customer base; as well as gaining access to all knowledge and expertise acquired by the company in its years of operation. The united company will fly under the “WOW air” brand, which will continue to emphasise entertaining service, extra legroom, and always providing the lowest available prices to and from Iceland. This acquisition creates a very powerful Icelandic low-fares airline with new destinations and greater frequency.

Wow Air will immediately begin offering more flights to Iceland from London and Copenhagen, as well as flights this winter from Berlin. Routes will also operate between Iceland and Salzburg over the skiing season and Warsaw and Kaunas over Christmas.

From next spring Wow Air will operate four Airbus A320s and will offer up to 400,000 tickets to and from Iceland. The company”s summer timetable will include 15 European destinations: London, Copenhagen, Paris, Amsterdam, Barcelona, Milan, Zurich, Stuttgart, Düsseldorf, Berlin, Lyon, Alicante, Frankfurt, Vilnius and Warsaw. In addition to the higher number of destinations, the frequency of flights to many of them will also increase significantly.

Wow Air was established in November 2011 by Icelandic serial entrepreneur Skuli Mogensen. Skuli has had a successful career building companies primarily in the telecom and technology sector in Iceland, Europe and North America. He was voted businessman of the year 2011 in Iceland.

Top Copyright Photo: Rolf Wallner. Avion Express is operating two Airbus A320s for Wow Air in their colors. A320-231 LY-COS (msn 415) “WOW Force Two” taxies at Zurich.

Bottom Copyright Photo: Marco Finelli. Holidays/Czech Airlines is the latest and final operator for Iceland Express. Holidays’ Airbus A320-214 OK-LEE (msn 2719) taxies at Bologna in Holidays colors with Iceland Express titles. Previously Astraeus Airlines and Hello operated aircraft for Iceland Express. Neither Icelandic “airlines” had an AOC.

Hawaiian reports a third quarter net profit of $40.6 million

Hawaiian Holdings, Inc. (Honolulu), parent company of Hawaiian Airlines, Inc. (Honolulu), reported third quarter 2012 adjusted net income of $40.6 million or $0.77 per diluted share, reflecting economic fuel expense, and GAAP net income for the third quarter of 2012 of $45.5 million, or $0.86 per diluted share.

Financial Highlights:

Adjusted net income, reflecting economic fuel expense, increase of 35.2% year-over-year and GAAP net income increase of 77.6% year-over-year.
Adjusted operating margin of 13.4%, reflecting economic fuel expense, and operating margin of 13.6%
Adjusted net income margin of 7.4%, reflecting economic fuel expense, and net income margin of 8.3%.
Operating cost per available seat mile (CASM) excluding fuel decrease of 6.8%.
Unrestricted cash and cash equivalents of $433.5 million.

The Company reported operating income of $74.9 million in the third quarter of 2012, compared with operating income of $60.9 million in the same period in 2011.

Operating revenue was $549.3 million, a 20.5% increase compared to the same period in 2011. Capacity for the third quarter of 2012 increased 28.0% year-over-year to 4.1 billion available seat miles, resulting in operating revenue per available seat mile (ASM) of 13.56 cents, down 5.8% from the same period in 2011. Passenger yield (passenger revenue per revenue passenger mile) decreased 3.6% year-over-year to 14.77 cents, resulting in a year-over-year decrease in passenger revenue per ASM of 5.7% to 12.30 cents. Selected Statistical Data is included in Table 2.

Total operating expenses increased 20.1% year-over-year to $474.4 million. CASM decreased 6.1% year-over-year to 11.71 cents. Excluding fuel, CASM decreased 6.8% year-over-year to 7.62 cents. Reconciliations of GAAP and non-GAAP financial measures are included in Tables 2 and 6.

Aircraft fuel costs increased 21.9% year-over-year to $165.8 million and represented 34.9% of total operating expenses. Hawaiian’s average cost per gallon of jet fuel decreased 4.1% year-over-year to $3.04 (including taxes and delivery). The financial impact of hedging activities is included in nonoperating income (expense), and as such is not reflected in fuel expense.

The Company believes that economic fuel expense is the best measure of the effect of fuel prices on its business as it most closely approximates the net cash outflow associated with the purchase of fuel for its operations in a period. The Company defines economic fuel expense as GAAP fuel expense plus (gains)/losses realized through actual cash (receipts)/payments received from or paid to hedge counterparties for fuel hedge derivative contracts settled during the period. For the three months ended September 30, 2012, economic fuel expense was $167.4 million ($3.07 per gallon), compared with $138.3 million ($3.22 per gallon) in the prior-year period. Analyses of economic fuel expense for the third quarter 2012 and 2011 and pro-forma net income (loss) and diluted net income (loss) per share reflecting economic fuel expense are included in Tables 3 and 4.

Nonoperating income (expense) totaled ($1.1) million, compared with ($13.6) million in the same period in 2011. The Company recognized gains on its fuel hedging activities, reflected in nonoperating income (expense), totaling $6.5 million compared with losses of $9.7 millionduring the same period in 2011.

A summary of the Company’s fuel derivatives contracts as of October 17, 2012 is included as Table 5.

As of September 30, 2012, the Company had:

Unrestricted cash and cash equivalents of $433.5 million.
Available borrowing capacity of $67.4 million under Hawaiian’s Revolving Credit Facility.
Outstanding debt and capital lease obligations of approximately $674 million consisting of the following:
- $251.2 million outstanding under secured loan agreements to finance a portion of the purchase price for four Airbus A330-200 aircraft.
- $174.6 million in secured loan agreements for a portion of the purchase price for 15 previously leased Boeing 717-200 aircraft.
- $108.2 million in capital lease obligations for an Airbus A330-200 aircraft and two Boeing 717-200 aircraft.
- $68.0 million outstanding under floating rate notes issued in conjunction with the acquisition of three Boeing 767-300 ER aircraft.
- $71.8 million outstanding of Convertible Senior Notes.

Copyright Photo: Bruce Drum. Boeing 767-33A ER N589HA (msn 33422) taxies to the runway at Seattle/Tacoma bound for Honolulu.

Hawaiian Airlines:

Alaska Airlines accepts its first new Boeing 737-900 ER, Boeing earns $1 billion in the third quarter

Alaska Airlines (Seattle/Tacoma) yesterday (October 23) took delivery of its first new Boeing 737-900 ER (Extended Range) (N402AS) aircraft.

Meanwhile, The Boeing Company (Chicago) reported third quarter net income of $1.0 billion, or $1.35 per share, on continued strong core performance and revenue of $20.0 billion. Increased earnings at Commercial Airplanes and Defense, Space & Security were more than offset by higher pension expense of $194 million ($0.18 per share). Earnings per share guidance for 2012 was raised to between $4.80 and $4.95. The company also raised its revenue guidance to between $80.5 and $82 billion on higher Defense, Space & Security revenue, and increased its 2012 operating cash flow outlook to greater than $5.5 billion.

Copyright Photo: Joe G. Walker. Boeing 737-990 ER N402AS (msn 41189) is pictured departing from a cloudy Boeing Field in Seattle as flight “Alaska 9401” bound for Paine Field (PAE) near Everett, to where it will be outfitted prior to entry into revenue service.

Alaska Airlines:

US Airways Group reports a third quarter net profit of $192 million, excluding special items

US Airways Group, Inc. (US Airways) (Phoenix) today reported its third quarter 2012 financial results. For the third quarter 2012, the Company reported a net profit excluding special items of $192 million, or $0.98 per diluted share, the second highest third quarter profit excluding special items in Company history. This compares to $95 million, or $0.51 per diluted share in the Company’s third quarter 2011. On a GAAP basis, the Company reported a record net profit of $245 million for its third quarter 2012, or $1.24 per diluted share, compared to a net profit of $76 million, or $0.41 per diluted share, for the same period in 2011.

Revenue and Cost Comparisons

Strong passenger demand and record consolidated third quarter yields led to improved revenue performance. Total revenues in the third quarter were a record $3.5 billion, up 2.8 percent versus the third quarter 2011 on a 2.7 percent increase in total available seat miles (ASMs). Total revenue per ASM was a record 15.22 cents, up 0.1 percent versus the same period last year, driven by a 0.6 percent increase in passenger yields.

Total operating expenses in the third quarter were $3.3 billion, up 0.3 percent over the same period last year. Mainline cost per available seat mile (CASM) was 12.70 cents, down 1.8 percent on a 2.8 percent increase in mainline ASMs. Total average fuel price per gallon fell 2.4 percent versus last year to $3.07 per gallon. Excluding special charges, fuel, and profit sharing mainline CASM was 7.95 cents, down 1.4 percent versus the same period last year. Express CASM excluding special charges and fuel was 13.97 cents, down 4.5 percent on a 2.4 percent increase in Express ASMs.

Liquidity

As of September 30, 2012, the Company had $2.8 billion in total cash and investments, of which $347 million was restricted. That is up from $2.4 billion, of which $384 million was restricted, on September 30, 2011.

Special Items

The Company recognized $14 million of net operating special charges in the third quarter of 2012, primarily consisting of charges related to corporate transaction and auction rate securities arbitration costs. In addition, the Company recorded $67 million of net nonoperating special credits which included a $69 million gain related to the slot transaction with Delta Air Lines, Inc.

Copyright Photo: Bruce Drum. Former America West Airlines’ Airbus A320-231 N631AW (msn 077) is now operating as US Airways taxies to the gate at Seattle/Tacoma International Airport. US Airways is still two airlines – East and West, with separate aircraft and crews for both divisions.

US Airways:

Delta reports a $768 million net profit in the third quarter, excluding special items

Delta Air Lines (Atlanta) today reported:

net income, excluding special items¹, for the September 2012 quarter was $768 million, or $0.90 per diluted share.
Delta’s September 2012 quarter GAAP net income was $1.0 billion, or $1.23 per diluted share, including mark-to-market gains on open fuel hedges and other special items.
Delta’s unit revenues were up 3 percent for the quarter and the company has produced a unit revenue premium to the industry for eighteen consecutive months.
Results included $174 million in profit sharing expense, for a total of $309 million year to date, in recognition of Delta employees’ efforts toward the company’s financial targets. In addition, Delta people have received $67 million in Shared Rewards in 2012 for hitting the company’s operational and customer service targets.
Delta ended the September 2012 quarter with $5.1 billion in unrestricted liquidity and adjusted net debt of $11.9 billion.

Revenue Environment

Delta’s operating revenue grew $107 million, or 1 percent, on 1.5 percent lower capacity in the September 2012 quarter compared to the September 2011 quarter. Load factor for the quarter increased 0.3 points year over year to 86.4 percent.

Passenger revenue increased 1 percent, or $124 million, compared to the prior year period. Passenger unit revenue (PRASM) increased 3 percent, driven by a 3 percent improvement in yield.
Cargo revenue decreased 5 percent, or $14 million, with lower cargo yields partially offset by higher volumes.
Other revenue decreased $3 million as lower third-party maintenance revenues were partially offset by higher codeshare revenue.

Comparisons of revenue-related statistics are as follows:

			Increase (Decrease)
			3Q12 versus 3Q11

Passenger Revenue		3Q12 ($M)	Change YOY	Unit Revenue	Yield	Capacity
	Domestic	$ 3,690	4%	3%	4%	1%
	Atlantic	1,751	(2)%	3%	2%	(5)%
	Pacific	1,108	5%	6%	3%	(1)%
	Latin America	468	3%	-%	(3)%	3%
	Total mainline	7,017	2%	3%	3%	(1)%
	Regional	1,675	(2)%	6%	6%	(8)%
	Consolidated	$ 8,692	1%	3%	3%	(2)%

“Our solid revenue performance reflects the benefits of capacity discipline, strong operational performance and the investments we have made in our products and service,” said Ed Bastian, Delta’s president. “We expect our revenue performance to benefit from our continued capacity discipline and further corporate travel gains and we are forecasting our October unit revenues to increase 4 – 5% year over year.”

Fuel

Excluding mark-to-market adjustments, Delta’s average fuel price² was $3.14 per gallon for the September quarter, which includes 3 cents per gallon in settled losses from its fuel hedging program. On a GAAP basis, which includes $440 million of mark-to-market gains on out of period hedges, the company’s average fuel price was $2.71 per gallon.

During the September quarter, jet fuel production began at Delta’s wholly-owned Trainer Refinery and the company expects the plant to be fully operational in the December quarter. For the December quarter, Delta expects Trainer’s production to generate a contribution of breakeven to $25 million.

Non-Fuel Cost Performance

Consolidated unit cost (CASM³), excluding fuel expense, profit sharing and special items, was 5.6 percent higher in the September 2012 quarter on a year-over-year basis, driven by the impact of capacity reductions, higher maintenance expense, wage increases and service investments. GAAP consolidated CASM decreased 2 percent primarily due to mark-to-market gains on open fuel hedges.

“With consistent investment in the business, our non-fuel costs have grown in the past few quarters and we expect that trend to continue into the first half of next year,” said Paul Jacobson, Delta’s chief financial officer. “However, we are in the process of implementing a $1 billion program of structural initiatives that we anticipate will generate significant savings in the second half of 2013, while maintaining the high quality product, network and operation we have built.”

Cash Flow and Liquidity

As of September 30, 2012, Delta had $5.1 billion in unrestricted liquidity, including $3.2 billion in cash and short-term investments and $1.9 billion in undrawn revolving credit facilities.

Operating cash flow during the September 2012 quarter was $545 million, driven by the company’s profitability, which was offset by the normal seasonal decline in advance ticket sales. Free cash flow for the September 2012 quarter was $120 million.

Capital expenditures during the quarter were $425 million, including $275 million for fleet, including advance payments for 737-900ERs, induction costs for MD-90s and interior modifications to Delta’s international fleet.

During the September quarter, Delta paid $270 million in net debt maturities and capital lease obligations. At September 30, the company’s adjusted net debt was $11.9 billion, a reduction of $5 billion since the end of 2009.

Subsequent to the end of the quarter, Delta refinanced $1.7 billion in debt and undrawn revolving credit facilities secured by the company’s Pacific routes and slots. As a result of this transaction, the company has maintained its revolving credit capacity and lowered the interest rate. Delta expects the transaction will generate more than $30 million in annual interest expense savings.

December 2012 Quarter Guidance

Delta’s projections for the December 2012 quarter are below.

	4Q 2012 Forecast

Average fuel price, including taxes and settled hedges	$ 3.15 – $3.20
Operating margin	4 – 6%
Capital expenditures	$450 – 550 million
Total liquidity at end of period	$ 5.2 billion


	4Q 2012 Forecast (compared to 4Q 2011)

Consolidated unit costs – excluding fuel expense and profit sharing	Up 5 – 7%
System capacity	Down 1 – 3%
Domestic	Down 1 – 3%
International	Down 2 – 4%

Special Items

Delta recorded special items totaling a $279 million gain in the September 2012 quarter, including:

a $440 million gain on mark-to-market adjustments on fuel hedges settling in future periods;
a $39 million gain associated with the exchange of slots at New York-LaGuardia and Washington-Reagan National;
a $12 million loss on extinguishment of debt;
a $66 million charge for severance and related costs; and
a $122 million charge for facilities, fleet and other, including charges resulting from the closure of Comair.

Delta recorded special items totaling a $216 million charge in the September 2011 quarter, primarily related to mark to market adjustments for open fuel hedges.

Notes:

(1) Note A to the attached Consolidated Statements of Operations provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.

(2) Average fuel price per gallon: Delta’s September 2012 quarter average fuel price of $3.14 per gallon reflects the consolidated cost per gallon for mainline and regional operations, including contract carrier operations, and includes the impact of fuel hedge contracts with original maturity dates in the September 2012 quarter. Settled hedge losses for the quarter were $26 million, or 3 cents per gallon. On a GAAP basis, fuel price includes $440 million in fuel hedge mark-to-market adjustments recorded in periods other than the settlement period.

(3) CASM – Ex: Delta excludes from consolidated unit cost ancillary businesses which are not related to the generation of a seat mile, including aircraft maintenance and staffing services which Delta provides to third parties and Delta’s vacation wholesale operations (MLT). The amounts excluded were $214 million and $232 million for the September 2012 quarter and September 2011 quarter, respectively.

Copyright Photo: Tony Storck. Boeing 747-451 N669US (msn 24224) lands at Baltimore/Washington International Thurgood Marshall Airport (BWI).

Delta Air Lines:

American Airlines announces new routes to Asia, Europe and Latin America

American Airlines (Dallas/Fort Worth) announced today that it will launch service to markets in Asia, Europe and Latin America, delivering on the airline’s business plan and network strategy designed to offer customers more choices to new destinations. Next year, American will begin the following international services: Dallas/Fort Worth – Seoul, South Korea; Dallas/Fort Worth – Lima, Peru; Chicago O’Hare – Dusseldorf, Germany; and New York JFK – Dublin, Ireland. This new service enhances American’s network footprint and will provide more access and choices for customers in key international markets. It will also add domestic service to match customer demand through its Dallas/Fort Worth and Chicago hubs.

Last week, American announced that international unit revenue increased 8.0 percent for the first nine months of 2012, driven by increased load factors across all entities and improved yield performance. Unit revenue performance in the Pacific entity for the same period was strong, up 13.3 percent, driven by increased demand for the premium cabins, greater revenues from Asia point-of-sale and joint selling efforts with joint business partner, Japan Airlines. The Latin American entity posted a 7.2 percent unit revenue increase for the first nine months of 2012, including yield improvements in Mexico and Central and South America. The growing strength of American’s enhanced network, together with coordinated selling efforts with joint business partners British Airways and Iberia over the Atlantic, helped drive a 6.5 increase in trans-Atlantic unit revenue improvement for the first nine months of 2012 versus the prior year.

The strengthening of American’s global network is just another example of the company’s progress toward its business plan, which includes focusing its hubs in the most important domestic and international cities, enhancing relationships with the best international alliance partners and creating a pipeline of industry-leading products and services, including a significant renewal and transformation of an aircraft fleet that American expects to be the youngest and most fuel-efficient among its U.S. airline peers by 2017.

New Service to Asia

From its largest hub at Dallas/Fort Worth, American will launch its first-ever service to Seoul on May 9, 2013. As one of the top 10 premium markets in the world, the new service to Seoul reinforces American’s commitment to customers and the Asia-Pacific region. The new service will be operated as a part of American’s joint business agreement with Japan Airlines and will provide convenient access for customers traveling from South Korea to connect to more than 200 flights from Dallas/Fort Worth to cities in the United States and Latin America.

More Service to Europe

Beginning April 11, 2013, American will add service between Chicago O’Hare and Dusseldorf, Germany. American will code share with oneworld^® alliance partner, airberlin – further reinforcing an already strong relationship and allowing customers to fly not only to Dusseldorf, but also to cities such as Moscow, Tel Aviv, and Nice through airberlin’s extensive network. This route will also operate as part of the joint business agreement with British Airways and Iberia.

In addition, American also will add new service between New York – JFK and Dublin, Ireland, beginning June 12, 2013. These new flights also will be operated in conjunction with American’s Atlantic joint business partners, British Airways and Iberia. From JFK, American flies non-stop to nearly 50 cities throughout Asia, Europe, North America and South America with nearly 90 daily departures.

Increased Service to Latin America

Beginning April 2, 2013, American will add service between Dallas/Fort Worth and Lima, Peru. American provides more service than any other airline between North America and Latin America with more than 900 weekly flights to 49 destinations. With the addition of Dallas/Fort Worth – Lima, customers can access 30 destinations to Central America, Mexico, and South America from the Dallas/Fort Worth hub.

In addition, this added service continues to enhance American’s relationship with oneworld partner, LAN, including reciprocal frequent flyer benefits for American Airlines AAdvantage^® and LANPASS members, and reinforces American’s commitment to the Peruvian market by providing seamless connections to multiple destinations including the Dallas/Fort Worth – Tokyo non-stop.

New Domestic Cities from Dallas/Fort Worth and Chicago:

On February 14, 2013, American will also add new domestic service, through its regional affiliates American Eagle and ExpressJet, from Dallas/Fort Worth to the following cities: Beaumont/Port Arthur, Texas, Columbia, Mo., and Fargo, N.D, as well as new Chicago O’Hare – Columbia, Missouri service.

DFW is the largest of American’s five domestic hubs offering more than 740 departures to nearly 170 cities in Asia, Europe, North America and South America.

Below is a summary of the new service:

International

Dallas/Fort Worth (DFW) – Lima (LIM)
AA2193 Leave DFW: 5:30 p.m. Arrive LIM: 12:25 a.m. (next day)
AA2194 Leave LIM: 2 a.m. Arrive DFW: 9:15 a.m.
Aircraft Type: Boeing 757
Frequency: Daily service
Start Date: April 2, 2013

Chicago O’Hare (ORD) – Dusseldorf (DUS)
AA242 Leave ORD: 5 p.m. Arrive DUS: 8:15 a.m. (next day)
AA241 Leave DUS: 12:10 p.m. Arrive ORD: 2:20 p.m.
Aircraft Type: Boeing 767-300
Frequency: Daily service
Start Date: April 11, 2013, subject to government approval

Dallas/Fort Worth (DFW) – Seoul (ICN)
AA27 Leave DFW: 10:30 a.m. Arrive ICN: 3 p.m. (next day)
AA26 Leave ICN: 5 p.m. Arrive DFW: 4:20 p.m.
Aircraft Type: Boeing 777-200
Frequency: Daily service
Start Date: May 9, 2013, subject to government approval

New York – JFK-Dublin (DUB)
AA290 Leave JFK: 6:55 p.m. Arrive DUB: 6:55 a.m. (next day)
AA291 Leave DUB: 9 a.m. Arrive JFK: 11:30 a.m.
Aircraft Type: Boeing 757-200
Frequency: Daily
Start Date: June 12, 2013, subject to government approval

Domestic

Dallas/Fort Worth (DFW) – Beaumont/Port Arthur (BPT)
AA2543 Leave DFW 8:40 a.m. Arrive BPT 9:50 a.m.
AA2521 Leave DFW 11:20 a.m. Arrive BPT 12:35 p.m.
AA2523 Leave DFW 3:10 p.m. Arrive BPT 4:20 p.m.
AA2525 Leave DFW 6:25 p.m. Arrive BPT 7:35 p.m. (except Saturday)
AA2510 Leave BPT 6:30 a.m. Arrive DFW 7:45 a.m.
AA2543 Leave BPT 10:20 a.m. Arrive DFW 11:30 a.m.
AA2521 Leave BPT 1:05 p.m. Arrive DFW 2:15 p.m.
AA2523 Leave BPT 4:50 p.m. Arrive DFW 6 p.m. (except Saturday)
Aircraft Type: CRJ 200
Frequency: All flights are daily except as noted above
Start Date: Feb. 14, 2013

Dallas/Fort Worth (DFW) – Columbia, Mo. (COU)
AA3396 Leave DFW Noon Arrive COU 1:25 p.m.
AA3348 Leave DFW 6:55 p.m. Arrive COU 8:25 p.m. (except Saturday)
AA3215 Leave COU 6:45 a.m. Arrive DFW 8:35 a.m.
AA3291 Leave COU 5:40 p.m. Arrive DFW 7:25 p.m. (except Saturday)
Aircraft Type: Embraer 145
Frequency: All flights are daily except as noted above
Start Date: Feb. 14, 2013

Chicago – O’Hare (ORD) -COU
AA3919 Leave ORD 3:55 p.m. Arrive COU 5:10 p.m.
AA3900 Leave COU 1:55 p.m. Arrive ORD 3:20 p.m.
Aircraft Type: Embraer 145
Frequency: Daily
Start Date: Feb. 14, 2013

Dallas/Fort Worth – Fargo (FAR)
AA2537 Leave DFW: 12:05 p.m. Arrive FAR: 2:30 p.m.
AA2537 Leave FAR: 3:05 p.m. Arrive DFW: 5:50 p.m.
Aircraft Type: CRJ 200
Frequency: Daily
Start Date: Feb. 14, 2013

American Airlines:

International growth fuels UPS to a third quarter operating profit

UPS-United Parcel Service (UPS Airlines) (Atlanta) reported yesterday (October 23) on its third quarter financial results. Here is the statement by the company:

UPS) has announced third quarter 2012 adjusted diluted earnings per share of $1.06. The International segment led the way with its highest third quarter in history generating $449 million in operating profit, up 7.7% over the prior-year period. UPS updated its full-year 2012 guidance for adjusted diluted earnings per share to a range of $4.55 to $4.65, reflecting greater confidence in fourth quarter execution.

On a reported basis, third quarter 2012 earnings per share were $0.48. In August, the company announced a decision to restructure pension liabilities for certain employees. As a result, UPS recorded an after-tax, non-cash charge of $559 million during the quarter.

“Our results were achieved in an environment of slowing global trade and changing market dynamics,” said Scott Davis, UPS chairman and CEO. “This not only highlights the flexibility of our business model; it illustrates the breadth of the UPS product portfolio in meeting the needs of customers.”

		Adjusted
Consolidated Results	3Q 2012	3Q 2012	3Q 2011
Revenue	$13.07 B		$13.17 B
Operating profit	$0.77 B	$1.66 B	$1.67 B
Operating margin	5.9 %	12.7 %	12.7 %
Average volume per day	15.5 M		15.1 M
Diluted earnings per share	$0.48	$1.06	$1.09

During the quarter, UPS delivered 15.5 million packages per day, a 2.9% increase over the prior-year period.

Cash Position

For the nine months ending Sept. 30, UPS generated free cash flow in excess of $3.6 billion. The company repurchased 18.5 million shares for approximately $1.4 billion and paid dividends totaling $1.6 billion, a 9.6% increase per share over the prior year.

Capitalizing on credit market conditions, during the quarter UPS issued $1.75 billion of debt. Proceeds will be used to pay notes that mature in January 2013. The company ended the period with $9.0 billion in cash and marketable securities. The primary uses of these funds will be the acquisition of TNT Express and debt repayment.

		Adjusted
U.S. Domestic Package	3Q 2012	3Q 2012	3Q 2011
Revenue	$7.86 B		$7.77 B
Operating profit	$129 M	$1,025 M	$1,046 M
Operating margin	1.6 %	13.0 %	13.5 %
Average volume per day	13.2 M		12.7 M

U.S. Domestic revenue increased $94 million over the prior-year period, driven by a 3.7% gain in daily package volume. Adjusted operating profit declined $21 million, impacted negatively by one less operating day and the timing of the fuel surcharge.

On a reported basis, operating profit was $129 million as a result of the pension restructuring previously mentioned.

Rapid e-commerce growth drove gains in daily volume, with Ground and Deferred up 3.0% and 9.3%, respectively. Next Day Air volume expanded 5.7% over the prior-year period, as retailers continued to utilize UPS Next Day Air Saver to differentiate their offerings.

Base rate improvements were more than offset by lower fuel surcharges, and changes in product and customer mix. Consequently, revenue per package declined 0.8% from the same quarter last year.

International Package	3Q 2012	3Q 2011
Revenue	$2.94 B	$3.06 B
Operating profit	$449 M	$417 M
Operating margin	15.3 %	13.6 %
Average volume per day	2.3 M	2.3 M

The International segment produced operating profit of $449 million, its highest third quarter ever. Operating margin was up 170 basis points over the prior-year period to 15.3%. Export package growth, network changes and currency translation contributed to this improvement.

Revenue declined 3.7%, as the impact from lower fuel surcharges and currency exceeded the benefit from the 1.2% growth in daily Export volume.

For the first time in several quarters, Asia exhibited growth in Export package volume, benefitting from product launches and easier comparisons. Although the rate of growth in Europe has slowed, it remained positive.

Supply Chain and Freight	3Q 2012	3Q 2011
Revenue	$2.27 B	$2.34 B
Operating profit	$188 M	$203 M
Operating margin	8.3 %	8.7 %

Operating margin for the Supply Chain and Freight segment remained strong at 8.3%. Operating profit was down $15 million, as declines in Forwarding were partially offset by improvement in UPS Freight.

The Freight Forwarding unit was pressured by overcapacity in the market, especially out of Asia. Revenue decreased as lower yields offset modest tonnage gains.

Although the Distribution unit experienced strong revenue growth, investments in healthcare capabilities and infrastructure weighed on margin expansion. Recently, UPS opened three new healthcare distribution facilities in Sydney, Australia and in Shanghai and Hangzhou, China.

UPS Freight revenue increased 3.6% as shipments per day were up slightly. LTL revenue per hundredweight and gross weight hauled improved over the prior year period, resulting in operating margin expansion.

Outlook

“UPS performance this quarter reflects the ability of our global network to adapt to soft macro conditions,” said Kurt Kuehn, UPS chief financial officer.

“While there is some uncertainty around the magnitude of the holiday shopping season, we are confident in UPS’s ability to deliver,” Kuehn continued. “As a result, we enhanced our guidance by narrowing the range, maintaining our previous midpoint. We anticipate 2012 adjusted diluted earnings per share to be within a range of $4.55 to $4.65, an increase of 5%-to-7% over 2011 adjusted results.”

Copyright Photo: Michael B. Ing. McDonnell Douglas MD-11 (F) N292UP (msn 48566) completes its final approach into Tokyo (Narita).

UPS: