U.S. airlines posted mixed results on Wednesday, with high fuel prices and the sputtering U.S. economy posing obstacles to a recovery boosted by rebounding demand and higher fares.
US Airways Group Inc reported its first profitable quarter in nearly three years, while AMR Corp's American Airlines narrowed its quarterly loss.
But discount carrier AirTran Holdings Inc posted a lower profit as higher expenses outstripped rising revenue.
US Airways shares shot up more than 8 percent, making it the top percentage gainer on the Arca Airline index <.XAL>. By contrast, AMR shares and AirTran shares trailed the index.
There are some airlines that compete with the lower-cost airlines and they have a hard time raising fares, said Helane Becker, an analyst with Dahlman Rose & Company. AMR has issues that go beyond traffic.
American is expected to be the only major U.S. carrier to report a loss for the second quarter. The company was the largest airline in the world until Delta merged with Northwest in 2008.
United Airlines, a unit of UAL Corp is set to merge later this year with Continental Airlines Inc creating a carrier even larger than Delta, relegating American to the No. 3 spot.
There's a lot of concern that American is slipping and that they are losing share to the peer group and they're just not growing, Becker said.
UAL and Delta both posted profits earlier this week. Continental is due to report on Thursday.
US AIR BEATS, AIRTRAN LAGS
Overall, U.S. airlines have posted the strongest second quarter since 2007, JPMorgan analyst Jamie Baker said in a research note.
Analysts credit recovering traffic, particularly from premium paying business customers, and higher fares. Ancillary revenue such as baggage fees have also contributed to the brightening prospects.
US Airways beat Wall Street expectations and its shares gained more than 5 percent after it posted a net profit of $265 million, excluding special items.
AirTran posted a lower profit as higher expenses outstripped rising revenue, pulling its shares down 1 percent.
Jim Corridore of Standard & Poor's repeated his buy rating on shares of US Airways and increased his 12-month price target to $12 from $10.
Becker pointed out that international business traffic had a particularly strong showing in the second quarter, helping to boost results. For US Airways, she added the improvement comes off a very low base.
FOCUS ON AMR
American narrowed its loss with a 14 percent gain in average fares that helped generate $5.7 billion in revenues.
AMR posted a net loss of $10.7 million or 3 cents per share, falling short of the average analyst expectations of a 1 cent-per-share loss as per Thomson Reuters I/B/E/S.
The company blamed its $11 million loss on $330 million in added fuel expenses.
While the price of oil has not returned to the crisis levels we saw two years ago, it has been up substantially compared to last year, AMR Chief Executive Gerard Arpey said in a statement.
Crude oil prices slipped to around $77 a barrel on Wednesday. Crude oil prices rose 8 percent in the second quarter.
Separately, AMR said it ordered 35 additional Next Generation Boeing Co 737-800s to be delivered in 2011 and 2012. The 737s are 35 percent more fuel-efficient than the MD80 aircraft they are replacing, the company said.
In another announcement, AMR said it named Chief Financial Officer Tom Horton as president of AMR and American Airlines, a position that has been held by Arpey.
(Additional reporting by Karen Jacobs in Atlanta; editing by Tim Dobbyn and Andre Grenon)