The results come a day after American Airlines parent AMR Corp posted a quarterly loss, but said demand was improving. Southwest, the leading US discount carrier, expects unit revenue to rise in the first quarter of 2010. Continental said the decline in revenue that it books per passenger eased in the fourth quarter, compared with the third quarter. "I think there's cautious optimism that business travel is returning," said airline consultant Doug Abbey. "International markets look stronger than most expected. So I think the hope is that we've bottomed out in the yield declines."
A drop in costs and higher-than-expected quarterly revenues helped the airlines beat analyst expectations. Continental's fuel costs fell by about a third in the fourth quarter, while Southwest fuel costs fell more than 13 percent. US airlines have cut jobs and trimmed capacity in the past two years in an effort to hem costs in the face of a severe recession in 2009 and a surge in fuel prices in 2008. Southwest said it would not increase capacity in 2010, while Continental expects mainline domestic capacity to remain flat. Continental expects international capacity to jump between 4 percent and 5 percent this year.
Shares of Continental jumped to as much as $21.58, its highest level in a year. More recently, it was trading at $21.07. Southwest shares rose nearly 1 percent to $11.42. Continental's fourth quarter mainline passenger revenue per available seat mile (PRASM) fell 10.4 percent. This was an improvement over the third quarter, when mainline passenger revenue slumped more than 20 percent.
The world's fifth-largest airline reported net income of $85 million, or 60 cents per share, in the fourth quarter. A year earlier, it reported a net loss of $269 million or $2.35 per share.
Excluding items, Continental posted a profit of 3 cents per share. Analysts on average expected the carrier to post a loss of 7 cents per share, according to Thomson Reuters I/B/E/S. The company's yield, or revenue per available seat mile, rose 7.4 percent in the fourth quarter.
Southwest reported net profit of $116 million, or 16 cents a share, compared with a net loss of $56 million, or 8 cents per share, a year earlier. Excluding items, it posted a profit of 10 cents per share. Analysts on average expected the carrier to post a profit of 7 cents per share, according to Thomson Reuters I/B/E/S. Southwest has derivative contracts for about half of its estimated 2010 fuel consumption at about $100 per barrel.