Airline Earnings Flying High, Real High (JBLU, LCC, DAL)

With so much interest in airlines of late, we have some reports to evaluate today. Lower fuel prices and full planes may be helping the trend, but the potential AMR buyout from bankruptcy makes the sector a wild card. JetBlue Airways Corp. (NASDAQ: JBLU), US Airways Group, Inc. (NYSE: LCC) and Delta Air Lines Inc. (NYSE: DAL) are out with earnings this morning.

US Airways Group, Inc. (NYSE: LCC) is leading the pack with a gain of 5% so far this morning in the price of its shares. Profits more than tripled on strong seat demand to $1.54 per share, or $306 million in total. Excluding items, this would have been $1.61 per share, and sales were up 7% to $3.8 billion. Both figures were slightly above the estimates, but shares are indicated up more than 5% at $12.20 so far this morning.

Jetblue Airways Corp. (NASDAQ: JBLU) was more or less in-line with expectations. Earnings came in at $0.16 per share on a 10% gain in revenues to $1.28 billion. Fuel hedging played a role, with a 3% decline in jet fuel prices. JetBlue recorded a $4 million mark-to-market fuel hedge charge in the quarter. Shares are up 1.5% at $5.35, against a 52-week range of $3.40 to $6.32.

Delta Air Lines Inc. (NYSE: DAL) is on the rise so far this morning after beating earnings: $0.69 EPS versus $0.68 estimates. Revenues rose by more than 6% to $9.73 billion, also about 1% above estimates. The air carrier said that it expects to have strong profitability in the September quarter with a 10% to 12% operating margin as it has been implementing cost controls, revamping its domestic fleet and adding a refinery. Delta shares are up about 4% at $9.70 this morning, against a 52-week range of $6.41 to $12.25.

So, airlines are cheap when you look at them on the surface, with earnings all well under 10-times earnings. Unfortunately we all know what happens to profitability in recessions and in soft economies. There is a reason Warren Buffett says to never ever buy a commercial airline.

JON C. OGG