AMR & Southwest Battle For Hindenburg Earnings (LUV, AMR)

Southwest Airlines Co, (NYSE: LUV) is getting to see some selling this morning after its earnings report.  Actually, that is after its losses.  Southwest is not used to this and you can’t help but wonder if the airliner has become just another air carrier.  AMR Corp. (NYSE: AMR) posted a much wider loss than Southwest has seen, yet its stock rose substantially and is up again this morning.

Southwest Airlines is not used to posting losses and its formerly praised fuel hedges that worked so well are suddenly working against the company.  Its EPS came in at -$0.12 vs. -$0.01 estimates. Excluding items the loss was -$0.03 EPS, still a loss. The net loss is $91 million, but this would have only been a loss of $20 million had those fuel hedges not gone so far against them.  First Call had analysts still expecting  the airline to be profitable just last weekend, but recent analyst trimmings brought the expectations down to a loss.  Its total revenues were also lower at -6.8%, or $2.357 billion, versus estimates of $2.4 billion.  Freight and passenger revenues were both down.

What gets interesting is that the estimates for next quarter are looking for much higher gains of $0.17 EPS on revenues of $2.71 billion.  The company is imposing a hiring freeze and will offer some workers buyouts to get off their labor force.

AMR lost much more money yesterday in its mid-day earnings report.  It posted a $375 million loss in the quarter.  It also noted that lower fuel prices offered a buffer against weak demand and a weak travel economy.  Its earnings were -1.35 EPS and revenues were $4.84 billion.  First Call had estimates at -$1.68.  The commentary showed improvements in passenger travel and in margins during the end of the quarter.  This is one of the instances where “less bad is good.”

At 9:00 AM EST we have seen Southwest trade down 3% at $7.40, and the 52-week range is $4.95 to $16.77.  AMR’s stock is actually up 3% at $5.16, but its 52-week range is $2.40 to $13.41.

When you see results like these, it gets hard to imagine that the fees for anything and everything under the sun will go away any time soon.

Jon C. Ogg