US Airways Group Inc. (NYSE:LCC) is expected to report a 13 percent increase in earnings per share as a result of strong third-quarter revenue, including the biggest growth in unit revenue among major American airlines in September.
The Tempe, Ariz.-based company will report third-quarter earnings on Wednesday. Analysts expect US Airways’ net income to rise 5.9 percent to $226.7 million from $192 million in the year-earlier quarter, while earnings per share are seen increasing to $1.12 from 98 cents per share. Revenue is projected to rise 8.8 percent to $3.84 billion from $3.53 billion, according to a Thomson Reuters survey of analysts.
US Airways has had a robustly strong quarter, judging from its monthly unit revenue numbers, which most major American airlines release as a way of managing Wall Street expectations. For July and August, US Airways’ passenger unit revenue (PRASM), an important measure of performance in the industry, grew 5 percent over the same periods last year. In September, its monthly revenue performance beat most analysts’ estimates – its PRASM grew 6 percent year-on-year, despite the conclusion of the peak leisure summer travel season at the end of August.
The company’s September PRASM numbers are the strongest among competitors, beating even industry darling Delta Air Lines Inc (NYSE:DAL), whose PRASM grew 5.5 percent in the same month, and United Continental Holdings Inc. (NYSE:UAL), which is expected to report disappointing numbers once again in the third quarter. All three companies will release earnings this week.
Overall, the airline industry has been doing well, in part thanks to a recovering U.S. economy, which has driven a rebound in business travel demand. More importantly, airline companies have for the first time taken steps to build a healthy sector.
“Cost convergence, fare unbundling, widespread consolidation, diminished new entrant activity, and return-oriented management teams have combined to form an industry that is actually managing itself for the first time we can recall,” Jamie Baker, a J.P. Morgan analyst, wrote in a research note published Oct. 3. “This stands in sharp contrast to the historical tendency to wage wars of attrition. As a result, we believe the U.S. airline industry will continue to take steps to ensure profitability and continued balance sheet repair.”
US Airways is the process of acquiring AMR Corporation in a $12.8 billion deal, bailing the parent of American Airlines out of bankruptcy and forming the largest airline in the world. The merger was challenged on antitrust grounds by the U.S. Justice Department with the trial scheduled to begin on Nov. 25. Nonetheless, analysts believe the merger is likely to go through.