El Al finalizes its order for two more Boeing 737-900 ERs

El Al Israel Airlines (Tel Aviv) and Boeing (Chicago) have finalized an order for two additional Next-Generation 737-900 ER (Extended Range) airplanes. The order comes just two weeks after the Israeli flag-carrier took delivery of its first 737-900 ER. This order brings the total number of 737-900 ERs ordered by El Al to eight.

The order was finalized at a special event hosted by El Al at the carrier’s base at Tel Aviv’s Ben Gurion International Airport to celebrate the recent arrival of El Al’s first 737-900 ER. The Boeing 737-900 ER has the highest capacity and lowest seat-mile cost of Boeing’s single-aisle family and will perfectly complement EL AL’s existing fleet of Next-Generation 737-700s and 737-800s.

El Al’s 737-900 ERs will also feature the innovative Boeing Sky Interior, enabling the airline to differentiate itself from its competitors by offering passengers a more comfortable travel experience. The 737 Boeing Sky Interior features modern sculpted sidewalls and window reveals, LED lighting to enhance the sense of spaciousness and larger pivoting overhead stowage bins.

Copyright Photo: Joe G. Walker. Brand new Boeing 737-958 ER 4X-EHA (msn 41552) was delivered to El Al on October 9, 2013.

El Al:

Ethiopian Airlines to take delivery of its first Boeing 777-300 ER on November 7

Ethiopian Airlines (Addis Ababa) will take delivery of its first Boeing 777-300 ER on November 7. Boeing 777-36N ER ET-APX (msn 42101) is the first of four and is currently being painted for the handover.

The new 777-300 ER will operate on Ethiopian’s dense routes such as from Addis Ababa to Guangzhou (China), Washington (Dulles) D.C., Dubai and Luanda. The aircraft is scheduled to serve the Addis Ababa – Luanda route three times a week, as of November 10, 2013, and three times a week on the Addis Ababa – Guangzhou route starting on November 15, 2013.

In other news, Ethiopian will extend its system to Singapore on December 3, 2013 with three weekly flights. The new flights to Singapore will be operated with Boeing 767-300 aircraft with 24 seats in Ethiopian Cloud Nine Business Class and 211 seats in Economy class.

Flight	Days	From	To	Departure	Arrival
ET626	TU/THU/SA	Addis Ababa	Singapore(via BKK)	00:40	18:15
ET627	TU/THU/SA	Singapore(via BKK)	Addis Ababa	22:45	06:25

Image: Ethiopian Airlines.

Ethiopian Airlines:

Boeing delivers the first Boeing 777-300 ER to Kenya Airways

Boeing (Chicago) has delivered a 777-300 ER (Extended Range) to GE Capital Aviation Services (GECAS) for lease to Kenya Airways (Nairobi). The pictured 777-36N ER 5Y-KZZ (msn 41818) was handed over on October 24.

Kenya Airways’ 777-300 ER is configured with 400 seats, 28 in Premier World and 372 in Economy, and features USB ports, power sockets and an all-new in-flight entertainment system throughout the cabin. The airplane can fly up to 7,825 nautical miles (14,490 kilometers) and is equipped with GE90-115B engines, the world’s most powerful commercial jet engine.

Kenya Airways is set to take delivery of a further two 777-300 ERs, including an additional lease, as part of the carrier’s 10-year strategic plan dubbed ‘Project Mawingu.’ The Nairobi-based carrier plans to increase its fleet size from 44 airplanes to 107 by 2021 and destinations from the current 62 to 115. Currently the airline operates an all-Boeing long-haul fleet of four 777-200 ERs and six 767-300 ERs.

With this delivery, Kenya Airways is also working with Boeing to support the Alaskan Sudan Medical Project (ASMP) by carrying 10,400 lbs (4,717 kilograms) of humanitarian supplies on the 777-300 ER’s delivery flight to Kenya. ASMP will use the supplies to build medical clinics, drill water wells and construct bio-sand filters for clean water in the Jonglei region of South Sudan. The humanitarian cargo will also include water pumps and agriculture equipment to support local farmers, fulfilling the ASMP’s mission statement of saving lives through health, clean water and agriculture.

Kenya Airways operates a fleet of more than 25 Boeing airplanes including, 777s, 767s and 737s. The carrier serves more than 60 destinations across Asia, Africa, the Middle East and Europe and has nine 787 Dreamliners currently on order from Boeing.

Copyright Photo: Nick Dean/AirlinersGallery.com. Boeing 777-36N ER 5Y-KZZ (msn 41818) climbs beautifully from the runway at Paine Field near Everett.

Ethiopian Airlines:

UPS reports its financial results for the third quarter

UPS (United Parcel Service) (UPS Airlines) (Atlanta) has announced diluted earnings per share of $1.16 for the third quarter of 2013, a 9.4% improvement over adjusted results for the same period last year. Total revenue was $13.5 billion, up 3.4% driven primarily by U.S. e-commerce shipments and strong European export growth.

For the three months ended Sept. 30, 2013, UPS delivered more than one billion packages worldwide, an increase of 4.6% over the prior-year period.

Daily package volume growth was led by International export and U.S. Domestic Ground, up 6.7% and 3.0%, respectively. Customers around the globe continue to seek lower cost solutions as demonstrated by the 11% jump in International deferred export products per day.

Last year, on a reported basis, third quarter diluted earnings per share was $0.48 as a result of an after-tax, non-cash charge of $559 million to restructure pension liabilities for certain employees.

“UPS is continuing to build global capabilities that position the company to meet the evolving supply chain needs of customers,” said Scott Davis, UPS chairman and CEO. “We are making investments in emerging markets, healthcare distribution and our worldwide retail delivery models, ensuring that UPS delivers both the solutions customers require and the returns our shareowners expect.”

Cash Flow

For the nine months ended Sept. 30, UPS generated $3.6 billion in free cash flow after capital expenditures of $1.6 billion. The company paid dividends of $1.7 billion, an increase of nearly 9% per share over the prior year, and repurchased 33 million shares for $2.9 billion.

U.S. Domestic Package

U.S. Domestic third quarter operating profit was $1.2 billion, up nearly 16%, and operating margin expanded 140 basis points over the prior year adjusted result, to 14.4%. Revenue increased 5.0% to $8.3 billion. Volume growth, cost reductions due to efficiency gains and safety improvements, as well as the benefit of one additional operating day, contributed to the improvement.

On a reported basis, third quarter 2012 U.S. Domestic operating profit was $129 million and operating margin was 1.6% as a result of the pension restructuring charge.

Total U.S. Domestic revenue per piece was up 1.0%, as higher base rates were mostly offset by lower fuel surcharges, decreased average package weight and changes in both product and customer mix.

Daily package volume was 2.3% higher than the same period last year, driven by e-commerce shipments with growth in both B2C and B2B. Next Day Air volume declined 3.3% due to a contraction in letter shipments.

International Package

International revenue increased 2.5% to $3.0 billion on daily package volume improvement of 6.5%. Daily export shipments were 6.7% higher, with European exports up nearly 10%, while growth out of Asia was flat. Non-U.S. Domestic volume was up 6.3%, driven by strong growth across Europe and Canada.

Total operating profit was $417 million, a decline of $32 million on a year-over-year basis, due to a $75 million negative impact from currency and fuel. Operating margin of 13.8%, remains industry leading.

Currency-neutral export revenue per piece declined 5.4%, primarily driven by growth in lower-yielding deferred products. Lower fuel surcharges and changes in trade lane mix also pressured yields.

UPS has expanded its presence and service portfolio in Mexico, helping businesses bring manufacturing closer to U.S. consumers. Recently announced offerings include the industry’s first guaranteed ground service from the U.S., Preferred LCL Ocean service from Asia and expanded retail presence in Northern Mexico.

Supply Chain & Freight

Operating profit improved 7%, to $201 million and operating margin expanded 60 basis points, to 8.9%. Revenue in the segment was down slightly from the prior year period to $2.25 billion, as growth in UPS Freight was offset by declines in the Forwarding business.

The Distribution business improved operating profit and margin despite continued investment in Healthcare infrastructure and technology. Revenue growth in Healthcare and Mail Services was offset by a decline in the High Tech sector.

In Forwarding, both operating profit and margin expanded. Growth in Ocean forwarding and Brokerage, as well as cost management activities, drove the improvement.

UPS Freight LTL revenue climbed 5.5% as a result of improved tonnage and rate increases. Operating margin for the business unit declined slightly, due to higher compensation and benefit expense.

Copyright Photo: Ivan K. Nishimura/AirlinersGallery.com. UPS Airlines’ McDonnell Douglas MD-11 (F) N286UP (msn 48453) taxies at Honolulu.

UPS:

Spirit delays flights and passengers due to voluntary engine inspections

Spirit Airlines (Fort Lauderdale/Hollywood) yesterday suffered through a series of delayed flights disrupting the travel plans of hundreds of passengers, especially at its FLL hub. Some passengers waited up to almost 12 hours for their aircraft to be cleared. Spirit took the extraordinary step to perform voluntary engine inspections of their fleet in the wake of an engine failure on an Airbus A319 last week flying between Dallas/Fort Worth to Atlanta. The A319 suffered an uncontained engine failure and returned safely to DFW.

Spirit announced its inspection have been completed and operations are getting back to normal.

Read the full report from CNN: CLICK HERE

Spirit Airlines:

Azman Air is a new airline in Nigeria

Azman Air (Azman Air Services Limited) (Kano) is yet another new airline in Nigeria which is planning to launch scheduled passenger flights with two Boeing 737-300s. The company was founded in 2010 by Abdul Manafi Yunusa. Azman Air is a wholly owned Nigerian airline.

The pictured former Bmibaby Boeing 737-36N G-TOYF (msn 28557) is now painted and is the second 737. This aircraft will become 5N-YSM on delivery. The first aircraft (G-TOYH, msn 28570) is still at Norwich awaiting delivery.

This aircraft is named “Athaji Yunusa Sarina”.

Azman intends to fly mainly from Kano, Abuja and Lagos. Here is a list of domestic routes being advertised on their website:

Copyright Photo: Keith Burton/AirlinersGallery.com. Boeing 737-36N G-TOYF (5N-YSM) (msn 28557) departs from Southend on a test flight after repainting.

Azman Air:

Allegiant Travel Company reports net income of $17.1 million in the 3Q, up 1%

Allegiant Travel Company (Allegiant Air) (Las Vegas) reported the following financial results for the third quarter 2013, as well as comparisons to prior year equivalents:

Unaudited	3 months endedSept 30,
	2013			2012			Change
Total operating revenue (m)	$	228.9		$	216.9		5.5	%
Operating income (millions)	$	29.2		$	28.7		1.7	%
Operating margin	12.8		%	13.3		%	(0.5)pp
EBITDA (millions)	$	46.7		$	44.6		4.7	%
EBITDA margin	20.4		%	20.6		%	(0.2)pp
Net income (millions)	$	17.1		$	16.9		1.0	%
Diluted earnings per share	$	0.91		$	0.87		4.6	%

“We are very proud to report our 43rd consecutive profitable quarter,” stated Maurice J. Gallagher, Jr., Chairman and CEO of Allegiant Travel Company. “We are pleased to produce another profitable quarter and be able to return cash to shareholders through our share repurchase program. In addition, I am proud to announce that Andrew Levy has been added to our Board of Directors and will also assume the role of Chief Operating Officer. His proven leadership abilities and extensive operational and financial expertise, as well as a deep understanding of the airline business, will be invaluable in his new role as COO.”

“Finally, we were significantly challenged operationally at the end of September many of our MD-80s were taken out of service due to an evacuation slide issue. Through the tireless efforts of our Team Members, we were able to minimize the disruption to our customers. I am very thankful to all of those individuals who worked extremely hard to put the operation back together in such a short amount of time.”

Notable Company Highlights

Completed the acquisition of five Airbus A320 aircraft. The company now owns seven A320s
Repurchased 491,000 shares for $47 million during the third quarter, average purchase price of $95.85 per share
Announced service from nine existing cities to Punta Gorda (Southwest Florida) to begin in the fourth quarter
Announced service to 12 new cities with service beginning in the fourth quarter and first quarter
Announced 29 new routes which will begin operation in the fourth quarter
Average aircraft in service was flat versus last quarter as we retired three MD-80 aircraft and temporarily grounded two MD-80 aircraft early in the quarter
Increasing MD-80 operating fleet from 52 at the end of the year to 53 in the first quarter of 2014

Third Quarter 2013 Revenue Performance

15th consecutive quarter of year over year increases in total average fare, 4.8 percent higher than a year ago
Florida TRASM grew by 9.6 percent despite 12.7 percent growth in ASMs
Same store markets, those which were operated in both the third quarter 2013 and 2012, generated a 5.0 percent increase in TRASM
Grew scheduled load factor to 90.8 percent despite a 4.2 percent increase in seats per departure
The September slide interruption resulted in approximately $1 million in refunds given to customers

	3Q13		3Q12		Change
Scheduled Service:
Average fare – scheduled service	$86.94		$82.30		5.6	%
Average fare – ancillary air-related charges	$38.99		$37.05		5.2	%
Average fare – ancillary third party products	$5.06		$5.59		(9.5	)%
Average fare – total	$130.99		$124.94		4.8	%
Scheduled service passenger revenue per ASM (PRASM) (cents)	8.14		7.89		3.2	%
Total scheduled service revenue per ASM (TRASM) (cents)	12.26		11.98		2.3	%
Load factor	90.8	%	90.1	%	0.7pp
Passengers (millions)	1.7		1.6		6.3	%
Average passengers per departure	150		143		4.9	%
Average scheduled service stage length (miles)	932		910		2.4	%

ASMs = available seat miles
PRASM = scheduled passenger revenue per scheduled available seat mile
TRASM = (scheduled passenger revenue + ancillary air revenue + ancillary third party revenue) per scheduled available seat mile

Third Quarter 2013 Cost Performance

Fuel expense per ASM declined 3.9 percent primarily due to a 5.8 percent increase in ASMs per gallon versus last year, which more than offset a 1.9 percent increase in average cost per gallon
Operating expense excluding fuel was negatively impacted by lower aircraft utilization and approximately $2 million in expense attributable to the evacuation slide interruption. The expense associated with the slide event is isolated to September and resulted in higher aircraft lease rentals expense as we contracted with other carriers for sub-service of aircraft to move some of our customers, higher station operations expense due to customer interrupted trip costs, and increased salary and benefits expense due to additional overtime
Salary and benefits expense per passenger increased 15 percent versus last year primarily due to an increase in the number of full time equivalents to support our growth, higher stock-based compensation expense and the continuation of the higher pay band for pilots which began in November 2012. The current pay band will continue through April 2014 when it will be subject to adjustment based on a trailing 12 month profitability test. Based on our forecasted profitability, we currently expect the pilot pay band to remain unchanged
Depreciation and amortization expense per passenger increased 8 percent primarily due to a change in estimated MD-80 engine residual values and useful life, and operating a larger contingent of 166 seat MD-80 aircraft
Other expense per passenger increased 31 percent due to a higher write-down of engine values in our consignment program compared to the prior year, non capitalizable information technology development costs, crew training for our growing Airbus fleet and costs to support a seasonal operating base in Los Angeles

	3Q13	3Q12	Change
Total System*:
Operating expense per passenger	$114.54	$108.92	5.2	%
Operating expense per passenger, excluding fuel	$63.37	$56.85	11.5	%
Operating expense per ASM (CASM) (cents)	10.58	10.29	2.8	%
Operating expense, excluding fuel per ASM (CASM ex fuel) (cents)	5.85	5.37	8.9	%
Average block hours per aircraft per day	5.1	5.2	(1.9	)%

*Total system includes scheduled service, fixed-fee contract and non-revenue flying.

Fourth Quarter 2013 Cost Trends

Salary and benefits expense is expected to increase due to additional staff required to support our growth
Maintenance and repair expense is expected to be slightly higher than fourth quarter 2012. For the full year, maintenance expense per aircraft per month is expected to be $100 thousand to $105 thousand as previously guided
Aircraft utilization is expected to decline 1.5%, which will pressure ex fuel unit costs when compared to fourth quarter 2012
Depreciation and amortization expense is expected to increase as seven A320 aircraft are scheduled to enter service in the fourth quarter. For the full year, depreciation per aircraft per month is expected to be between $92 thousand and $95 thousand, as previously guided

Third Party Products Performance

Rental car days increased 6.5 percent primarily due to a 18 percent increase in Florida passengers
Hotel net revenue excluding the effect of an air discount was higher by 39 percent versus last year. The company has phased out offering an air discount which has historically subsidized hotel sales

Supplemental Ancillary Revenue Information Unaudited (millions)	3Q13		3Q12		Change
Gross ancillary revenue – third party products	$28.7		$28.3		1.4	%
Cost of goods sold	($19.6	)	($18.5	)	5.9	%
Transaction costs*	($0.5	)	($0.8	)	(37.5	)%
Ancillary revenue – third party products	$8.6		$9.0		(4.4	)%
As percent of gross	30.1	%	31.9	%	(1.8)pp
As percent of income before taxes	31.3	%	33.6	%	(2.3)pp
Ancillary revenue – third party products/scheduled passenger	$5.06		$5.59		(9.5	)%

Hotel room nights (thousands)	144.4		163.4		(11.6	)%
Rental car days (thousands)	195.3		183.3		6.5	%

*Includes payment expenses and travel agency commissions.

Balance Sheet Highlights

Repurchased 491,000 shares for $47 million and have over $43 million in repurchase authority remaining. Year to date, the company has repurchased 880,991 shares at an average price of $85.64 per share
Issued $48.0 million in debt secured by four Airbus aircraft
Pre-paid $10.5 million in debt secured by four 757 aircraft
Spent $84.5 million in capital expenditures in the third quarter, the majority of which was driven by the purchase of five Airbus A320 aircraft
Closed a $10 million debt financing in October, secured by our new headquarters building acquired earlier this year

Unaudited (millions)	9/30/2013	12/31/2012	Change
Unrestricted cash*	$303.6	$352.7	(13.9	)%
Total debt	$179.7	$150.9	19.1	%
Total Allegiant Travel Company stockholders’ equity	$402.4	$400.5	0.5	%

Nine months ended September 30,
Unaudited (millions)	2013		2012
Capital expenditures	$161.6	$88.8		82.0	%

*Unrestricted cash includes investments in marketable securities.

At this time, Allegiant Travel Company provides the following guidance to investors, subject to revision.

Guidance, subject to revision

Revenue guidance	October 2013	4Q13
Estimated PRASM year-over-year change	5 to 7%	3 to 5%
Estimated TRASM year-over-year change	1 to 3%	0.5 to 2.5%

Fixed fee and other revenue guidance		4Q13
Fixed fee and other revenue (millions)		$3 to $5

Capacity guidance
System	4Q13	1Q14	FY13
Departure year-over-year growth	(4) to 0%	8 to 12%
ASM year-over-year growth	4 to 8%	10 to 14%	8 to 10%
Scheduled
Departure year-over-year growth	2 to 6%	8 to 12%
ASM year-over-year growth	8 to 12%	10 to 14%	13 to 15%

Cost guidance	4Q13		FY13
CASM ex fuel – year-over-year change	4.5 to 6.5%		4 to 5%

CAPEX guidance			FY13
Capital expenditures (millions)			$170 to $180

CASM ex fuel – cost per available seat mile excluding fuel expense

Aircraft fleet plan by end of period

Aircraft	4Q13	4Q14
MD-80 (166*)	51	53
MD-80 (non 166*)	1	–
757	6	6
A319	3	4
A320	7	9
Total	68	72

*166 refers to MD-80s that have been converted to 166 seat aircraft, non 166 refers to those aircraft that will not be converted
Aircraft listed in table above include only in service aircraft

In other news, the company announced new, nonstop jet service from Cincinnati-Northern Kentucky International Airport to Orlando-Sanford International Airport starting on February 12, 2014 and Punta Gorda Airport beginning on February 14, 2014.

This announcement marks the 100th U.S. city served by Allegiant’s low-cost, nonstop service to popular vacation destinations, more than any other low-cost carrier in the U.S.

Copyright Photo: Tony Storck/AirlinersGallery.com. Allegiant Air’s McDonnell Douglas DC-9-82 (MD-82) N408NV (msn 53246) in the Blue Man Group special livery lands at the Las Vegas hub and base. Allegiant moved to Concourse A at LAS on October 15.

Allegiant Air:

United posts a 3Q net profit of $590 million

United Airlines (Chicago) reported third-quarter 2013 net income of $590 million, an increase of 13.5 percent year-over-year, or $1.51 per diluted share, excluding $211 million of special charges. Including special charges, UAL reported third-quarter 2013 net income of $379 million, or $0.98 per diluted share.

UAL generated $10.2 billion of revenue in the third quarter of 2013.
United’s consolidated passenger revenue per available seat mile (PRASM) increased 2.7 percent in the third quarter compared to the third quarter of 2012.
Third-quarter consolidated unit costs (CASM), holding fuel rate and profit sharing constant and excluding special charges and third-party business expense, increased 3.6 percent year-over-year on a consolidated capacity (available seat miles) reduction of 1.1 percent. Third-quarter consolidated CASM increased 1.2 percent year-over-year.
United’s third-quarter consolidated fuel efficiency (gallons per available seat mile) improved 1.1 percent year-over-year, due primarily to replacing older aircraft with highly efficient new Boeing 737-900ERs and Boeing 787 Dreamliners.
UAL ended the third quarter with $6.7 billion in unrestricted liquidity.

“We have significantly improved our operations, customer service and product, and are now competitive on all those dimensions. I want to thank my co-workers as we work together to deliver on our promise of making United flyer friendly,” said Jeff Smisek, chairman, president and chief executive officer. “However, we are not satisfied with our financial performance, and are taking prompt actions to increase our revenue and operate more efficiently across the company.”

Third-Quarter Revenue and Capacity

For the third quarter, total revenue was $10.2 billion, an increase of 3.2 percent compared to the same period in 2012. Third-quarter consolidated passenger revenue increased 1.6 percent year-over-year to $8.9 billion, on a consolidated capacity decrease of 1.1 percent year-over-year. Other revenue in the third quarter increased 25.0 percent year-over-year to $1.1 billion and third-quarter cargo revenue decreased 19.1 percent versus the third quarter of 2012 to $199 million.

Consolidated revenue passenger miles (RPMs) decreased 0.3 percent on a consolidated capacity decrease of 1.1 percent year-over-year, resulting in a consolidated load factor of 85.9 percent in the third quarter.

Third-quarter consolidated PRASM increased 2.7 percent compared to the same period in 2012. Consolidated yield for the third quarter increased 1.9 percent year-over-year.

“This quarter my co-workers consistently delivered solid operational performance, and our customer satisfaction scores continue to rise,” said Jim Compton, UAL’s vice chairman and chief revenue officer. “We are, however, disappointed by the pace of our revenue improvements, and we are taking numerous actions to improve our performance to more swiftly realize our full revenue potential.”

Third-quarter passenger revenue and period-to-period comparisons of related statistics for UAL’s mainline and regional operations are as follows:

	3Q 2013 Passenger Revenue (millions)	Passenger Revenue vs. 3Q 2012	PRASM vs. 3Q 2012	Yield vs. 3Q 2012	Available Seat Miles vs. 3Q 2012

Domestic	$3,339	0.4%	2.9%	2.3%	(2.4%)

Atlantic	1,765	11.0%	9.0%	5.6%	1.9%
Pacific	1,289	(11.0%)	(9.4%)	(8.4%)	(1.7%)
Latin America	632	0.6%	0.5%	1.2%	0.2%
International	3,686	0.5%	0.2%	(0.7%)	0.3%

Mainline	7,025	0.5%	1.6%	0.8%	(1.1%)
Regional	1,893	6.3%	7.1%	6.1%	(0.8%)

Consolidated	$8,918	1.6%	2.7%	1.9%	(1.1%)

Third-Quarter Costs

Total operating expenses increased $11 million, or 0.1 percent, in the third quarter versus the same period in 2012. Excluding special charges, third-quarter total operating expenses increased $314 million, or 3.4 percent, year-over-year.

Third-quarter consolidated CASM increased 1.2 percent year-over-year. Third-quarter consolidated CASM, excluding special charges and third-party business expense, increased 2.9 percent compared to third-quarter 2012. Third-party business expense was $205 million in the third quarter of 2013.

In the third quarter, consolidated CASM, excluding special charges and third-party business expense and holding fuel rate and profit sharing constant, increased 3.6 percent compared to the third quarter of 2012.

“We are committed to operating more efficiently across all aspects of our business,” said John Rainey, UAL’s executive vice president and chief financial officer. “We continue to improve our balance sheet and to make return-driven investments in our business, both of which are critical to creating long-term economic value for our stakeholders.”

Liquidity and Cash Flow

UAL ended the third quarter with $6.7 billion in unrestricted liquidity, including $1.0 billion of undrawn commitments under its revolving credit facility. During the third quarter, UAL generated $237 million of operating cash flow. The company’s gross capital expenditures and purchase deposits for the quarter were $598 million, and the company made debt and capital lease principal payments of $253 million in the third quarter.

Third-Quarter 2013 Accomplishments
Operations, Co-workers and Customer Service

United Airlines reported a third-quarter mainline on-time arrival rate (domestic and international) of 78.9 percent. The on-time arrival rate is based on flights arriving within 14 minutes of scheduled arrival time. United co-workers earned cash-incentive payments of $9 million for on-time performance during the third quarter.
The company reached tentative agreements on new joint collective bargaining agreements with the International Association of Machinists (IAM) for the more than 28,000 fleet service, passenger service and storekeeper employees.
United’s pilots established an integrated seniority list, and United announced it offered recall to nearly 600 pilots currently on furlough to address the airline’s future staffing needs.
United neared completion of its comprehensive customer service training program for all customer-facing co-workers worldwide with more than 90 percent of mainline and United Express flight attendants, airport agents and reservation agents trained through the third quarter.

Network, Fleet and Sustainability

In the third quarter, the company announced it is expanding its leading worldwide route network and will launch future nonstop service from San Francisco to Chengdu, China, the fourth-largest Chinese city, and from Chicago to Edinburgh, Scotland, beginning in June 2014. This quarter, United launched new nonstop service to St. Lucia, as well as additional nonstop service to Anchorage, Alaska; Austin, Texas; Traverse City, Mich.; and Saskatoon, Saskatchewan, Canada. The company also announced it is adding three other cities to its network: Elmira, N.Y., Topeka, Kan.; and Sun Valley, Idaho, as well as additional service to Fort Myers, Fla.; Hayden, Colo.; Indianapolis; and State College, Pa.
The company took delivery of seven new highly efficient aircraft, including six Boeing 737-900 ERs and one Boeing 787 Dreamliner, and removed from service seven Boeing 757-200s.
A United Boeing 737-800 aircraft retrofitted with the new Split Scimitar Winglet began test flights. United is the North American launch customer for the Next-Generation 737 advanced winglet that improves the efficiency of the company’s 737 fleet by approximately 2 percent while simultaneously reducing carbon emissions, and the company will begin installing the new winglets across its 737 fleet by year end.
United was named the Eco-Aviation “Airline of the Year” Gold Winner by Air Transport World (ATW) magazine.

Product, Loyalty Program and Facilities

United debuted its new brand campaign, featuring its iconic “Fly the Friendly Skies” tagline, reinterpreted for today’s travelers. The new campaign explains United’s commitment to being “user-friendly,” which to customers today means the combination of service, technology and product enhancements.
The company continued outfitting aircraft with global satellite Wi-Fi across its entire mainline fleet, offering inflight connectivity on long-haul international flights. The airline now has more than 115 Wi-Fi-equipped aircraft and is outfitting about one aircraft per day with global satellite Wi-Fi.
The airline expanded its offering of live television to more than 200 aircraft, offering customers more than 100 channels of live programming while in-flight. United operates more live television-equipped aircraft than any other airline in the world.
United released refreshed applications for iPhone, Android and BlackBerry 10 that include streamlined user interfaces along with a new feature that enables customers to manage their travel in real time if a flight delay or cancellation should occur.
United continued retrofitting its p.s. (Premium Service) transcontinental aircraft that fly from New York to Los Angeles and San Francisco. The airline already has retrofitted 12 of its 15 p.s. aircraft with the latest cabin interiors, premium-cabin flat-bed seats, and personal on-demand entertainment and Wi-Fi throughout the aircraft.
United debuted its Choice Menu “Bistro on Board” featuring new fresh food menu options available for sale to Economy customers on flights longer than three-and-a-half hours within North America and to and from Central America. United is providing customers innovative selections made with high-quality ingredients that will change seasonally.
United MileagePlus and Marriott Rewards® joined forces to provide their most loyal members with unprecedented travel benefits. Through the RewardsPlus program, United customers who are Premier Gold MileagePlus members or above can enjoy Marriott Gold Elite status and benefits. The program also offers Marriott Rewards Platinum Elite members MileagePlus Premier Silver status.
The company teamed up with Mercedes-Benz USA to provide innovative new benefits exclusively to United’s most frequent flyers seeking a luxury driving experience. MileagePlus Premier members receive incentives and 25,000 bonus miles when purchasing or leasing certain new Mercedes-Benz vehicles. In addition, United and Mercedes partnered to offer United’s Global Services customers tarmac transfer service at the airline’s Chicago and Houston hubs.
The company opened its new United Club lounge in Terminal 2 at San Diego International Airport, the third club to feature the airline’s new design concept.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. United is gradually phasing out its older Boeing 757-200s with seven retired in this quarter alone. Ex-Continental Boeing 757-224 WL N17122 (msn 27564) departs from Los Angeles.

United Airlines:

Southwest reports a record 3Q net profit of $241 million

Southwest Airlines Company (Dallas) reported its third quarter 2013 results:

Record third quarter net income, excluding special items*, of $241 million, or $.34 per diluted share, compared to third quarter 2012 net income, excluding special items, of $97 million, or $.13 per diluted share. This was in line with the First Call consensus estimate of $.34 per diluted share.
Record third quarter net income of $259 million, or $.37 per diluted share, which included $18 million (net) of favorable special items, compared to net income of $16 million, or $.02 per diluted share, in third quarter 2012, which included $81 million (net) of unfavorable special items.
Return on invested capital* (before taxes and excluding special items) for the 12 months ended September 30, 2013, of 11 percent, as compared to 7 percent for the 12 months ended September 30, 2012.
Cash and short-term investments at September 30, 2013, of $3.3 billion.
Cash flow from operations of $428 million, and capital expenditures of $268 million, resulting in $160 million in free cash flow* in third quarter 2013.
The Company returned approximately $178 million to Shareholders during third quarter 2013 through the payment of $28 million in dividends and the repurchase of approximately $150 million in common stock under an accelerated share repurchase program executed in September 2013. Since August 2011, the Company has repurchased approximately $1.1 billion, or approximately 111 million shares, under its $1.5 billion share repurchase authorization.

Gary C. Kelly, Chairman of the Board, President, and Chief Executive Officer, stated, “We are very pleased to report a record third quarter earnings performance. Our People delivered very strong year-over-year earnings growth as we continued to transform our Company for the future. Our continued focus on strategic initiatives is paying off, and I am very proud of our outstanding Employees for a very solid third quarter financial performance.

“Third quarter revenues were also a third quarter record, with total operating revenues per available seat mile (unit revenues) increasing 4.5 percent year-over-year. Especially considering our increase in stage length and seat density, this is a very strong performance. Further, we continue to have a high number of markets under development as we convert AirTran routes into Southwest routes and optimize our combined networks. Finally, about 15 percent of our system is still operating under the AirTran brand. As the network stabilizes in the future, AirTran becomes fully converted, and fewer schedule changes are made, this should provide a further boost to unit revenues. While unit revenue trends were impacted by the recent government shutdown, current bookings for the combined November/December holiday period are strong.

“We are on track with our plan to fully integrate AirTran into Southwest Airlines by the end of next year, and we expect to achieve approximately $400 million in annual net pre-tax synergies in 2013. Our efforts to optimize our connected networks continued during third quarter, with the conversion of AirTran’s service at Grand Rapids Gerald R. Ford International Airport to Southwest. Southwest’s entrance to western Michigan doubled the service previously offered by AirTran, with a total of six daily nonstop departures to Baltimore/Washington, Orlando, St. Louis, and Denver. We will take another significant step towards full integration with our November 2013 schedule, as we reschedule AirTran’s Atlanta flights into a point-to-point operation.

“Our plan to add international capabilities for Southwest in 2014 is on track. We reached an exciting milestone last month with the ground breaking on Southwest’s first international terminal in our 43-year history. The five-gate facility at Houston’s William P. Hobby Airport, planned to open in 2015, will accommodate Southwest service to potential destinations in the Caribbean, Mexico, Central America, and northern South America.

“Our fleet modernization efforts are continuing as planned. During third quarter 2013, we placed one new Boeing 737-800 and two previously owned Boeing 737-700s into active service, and retired four Boeing 737-500 aircraft. In addition, we transitioned the first of AirTran’s 88 Boeing 717-200s out of the fleet, and removed 11 more from active service in preparation for transition. At the end of the third quarter, all Southwest Boeing 737-700s, 78 Boeing 737-300s, and 14 AirTran Boeing 737-700s converted to the Southwest livery had been retrofitted with the Evolve interior. Following a two percent year-over-year increase expected this year, our available seat miles are not expected to increase year-over-year in 2014. As we continue to execute our strategic initiatives, our priorities remain: optimize the network; run an excellent airline operation; provide outstanding and friendly Customer Service; and achieve and sustain our targeted financial returns.

“Our third quarter economic fuel costs declined 5.7 percent year-over-year driven by lower prices per gallon and less fuel consumed per available seat mile. We currently expect another significant year-over-year decrease in our fourth quarter 2013 economic fuel costs. Based on relatively stable current market prices and our existing fuel derivative contracts, as of October 21^st, we expect our fourth quarter economic fuel price per gallon to be comparable to our third quarter 2013 economic fuel price per gallon.

“Excluding fuel, special items, and profitsharing, our unit costs increased slightly compared to third quarter last year, as expected. Based on current trends and ongoing benefits anticipated from our fleet modernization efforts, we expect our fourth quarter 2013 unit costs, excluding fuel, special items, and profitsharing, to be roughly flat versus a year ago.

“It is imperative that we preserve our financial health and return value to our stakeholders. Our balance sheet, liquidity, and cash flows are strong, and we are aggressively managing our debt and total invested capital. Our People are exceptional and they are working exceptionally hard. I am proud of them and these strong third quarter results.”

Awards and Recognitions

Ranked first Value Airline Brand of the Year in the 2013 Harris Poll EquiTrend Rankings
Named one of the Best Economy Class Flight Experience in 10 Best Readers’ Choice travel award contest sponsored by USA TODAY
Ranked fifth on the International Council on Clean Transportation list of the most fuel efficient domestic passenger airlines

Financial Results

The Company’s third quarter 2013 total operating revenues increased 5.5 percent to $4.5 billion, while operating unit revenues increased 4.5 percent, on a 1.0 percent increase in available seat miles and an approximately 4.0 percent increase in average seats per trip, all as compared to third quarter 2012. Total operating expenses in third quarter 2013 decreased 2.4 percent to $4.2 billion, as compared to third quarter 2012. The Company incurred costs (before taxes) associated with the acquisition and integration of AirTran, which are special items, of $28 million during third quarter 2013, compared to $145 million in third quarter 2012. Cumulative costs associated with the acquisition and integration of AirTran, as of September 30, 2013, totaled $391 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 of $4.1 billion in third quarter 2013 were comparable to third quarter 2012.

Third quarter 2013 economic fuel costs were $3.06 per gallon, including $.01 per gallon in favorable cash settlements from fuel derivative contracts, compared to $3.16 per gallon in third quarter 2012, including $.03 per gallon in unfavorable cash settlements from fuel derivative contracts. Based on the Company’s fuel derivative contracts and market prices as of October 21^st, fourth quarter 2013 economic fuel costs are expected to be in the $3.05 to $3.10 per gallon range, which is significantly below fourth quarter 2012’s economic fuel costs of $3.32 per gallon. As of October 21^st, the fair market value of the Company’s hedge portfolio through 2017 was a net asset of approximately $135 million. Additional information regarding the Company’s fuel derivative contracts is included in the accompanying tables.

Excluding economic fuel expense, special items, and profitsharing in both periods, third quarter 2013 operating costs increased 2.0 percent from third quarter 2012, and increased 1.0 percent on a unit basis.

Operating income for third quarter 2013 was $390 million, compared to $51 million in third quarter 2012. Excluding special items, operating income was $439 million in third quarter 2013, compared to $208 million in the same period last year.

Other income in third quarter 2013 was $29 million, compared to other expenses of $18 million in third quarter 2012. This $47 million swing primarily resulted from $59 million in other gains recognized in third quarter 2013, compared to other gains of $10 million recognized in third quarter 2012. In both periods, these gains primarily resulted from unrealized mark-to-market gains/losses associated with a portion of the Company’s fuel hedging portfolio, which are special items. Excluding these special items, third quarter 2013 had $19 million in other expense, compared to $18 million in third quarter 2012, primarily attributable to the premium costs associated with the Company’s fuel derivative contracts. Fourth quarter 2013 premium costs related to fuel derivative contracts are currently estimated to be approximately $22 million, compared to $3 million in fourth quarter 2012. Net interest expense in third quarter 2013 of $30 million was comparable to third quarter 2012.

For the nine months ended September 30, 2013, total operating revenues increased 2.8 percent to $13.3 billion, while total operating expenses of $12.4 billion were comparable to the same period last year. Operating income for the nine months ended September 30, 2013, was $893 million, compared to $532 million for the same period last year. Excluding special items in both periods, operating income was $1.0 billion for the nine months ended September 30, 2013, compared to $702 million for the same period last year.

Net income for the nine months ended September 30, 2013, was $542 million, or $.75 per diluted share, compared to $343 million, or $.45 per diluted share, for the same period last year. Excluding special items, net income for the nine months ended September 30, 2013, was $569 million, or $.79 per diluted share, compared to $352 million, or $.46 per diluted share, for the same period last year.

As of October 23^rd, the Company had approximately $3.6 billion in cash and short-term investments, and a fully available unsecured revolving credit line of $1 billion. Net cash provided by operations during third quarter 2013 was $428 million, and capital expenditures were $268 million. During third quarter 2013, the Company returned approximately $178 million to its Shareholders through the payment of $28 million in dividends and the repurchase of approximately $150 million in common stock under an accelerated share repurchase program with a third party financial institution. On September 6, 2013, pursuant to the accelerated share repurchase program, the Company advanced the $150 million to the financial institution and received approximately 11.5 million shares of the Company’s common stock. The specific number of shares that the Company ultimately will repurchase under the accelerated share repurchase program will be determined based generally on a discount to the volume-weighted average price per share of the Company’s common stock during a calculation period to be completed in fourth quarter 2013. 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.

For the nine months ended September 30, 2013, net cash provided by operations was $2.2 billion, and capital expenditures were $995 million, resulting in free cash flow of approximately $1.2 billion. For the nine months ended September 30, 2013, the Company repurchased approximately $501 million in common stock, or approximately 38 million shares. Since August 2011, the Company has repurchased approximately $1.1 billion, or approximately 111 million shares, of common stock under its $1.5 billion share repurchase authorization. The Company repaid $267 million in debt and capital lease obligations during the nine months ended September 30, 2013, and intends to repay approximately $46 million more in debt and capital lease obligations during fourth quarter 2013.

Copyright Photo: Brian McDonough/AirlinersGallery.com. Southwest Airlines’ Boeing 737-7H4 WL N781WN (msn 30601) “New Mexico One” arrives in Washington (Reagan National).

Southwest Airlines:

JetBlue starts service between Hartford and both Fort Myers and Tampa

JetBlue Airways (New York) today launched new nonstop flights from Hartford Bradley International Airport to both Fort Myers and Tampa.

JetBlue will serve eight airports in New England: Boston, Burlington, Hartford, Martha’s Vineyard, Nantucket, Portland and Providence, with new service to Worcester, starting November 7. Hartford service will peak in December 2013 at 10 daily departures from Hartford Bradley to six destinations. Service on the Hartford-Fort Myers route is seasonal.

JetBlue’s schedule between Hartford (BDL) and Fort Myers (RSW), effective October 27, 2013: