Signs of airline industry making a comeback?

In a positive development, American Airlines Inc. reported its highest quarterly profit in six years and Southwest Airlines Co.’s earnings more than doubled on increased fares and travel demand.

According to experts, the financial performance gave signs of industry turning the corner after five years of heavy losses by packing planes and raising fares at the start of the summer travel season. Analysts said the results at Southwest and American indicated that the airline industry is making a comeback, albeit one that is threatened by uncertainty over the economy and fuel prices.

AMR Corp.’s American shared that profit rose fivefold to US$291-million or $1.14 a share in the second quarter, from $58-million or 30 cents a year earlier.

“We are pleased to have earned a quarterly profit -- just our second in the last 22 quarters without the benefit of special items,” said AMR chairman and chief executive officer Gerard Arpey. “Our performance indicates very clearly that we are on the right track, but also demonstrates -- just as clearly -- that we have more work to do to return our company to financial health.”

According to Arpey, the stubbornly high cost of fuel and ongoing competitive pressures in the industry remain significant obstacles.

“Fuel costs continue to raise the bar in terms of revenue generation, while the growth of low-cost carriers and continuing competition from bankrupt carriers with significant cost advantages drive the need for increased efficiencies and cost savings across all areas of our business,” Arpey said.

AMR reported second quarter consolidated revenues of approximately $6 billion, an increase of 12.5 percent year over year. In spite of rising fuel costs, Arpey pointed out that AMR continues to enjoy solid revenue momentum. “The combination of capacity restraint, the changes we have made to our network and product offerings, and the consistent, high-quality service provided by our employees has enabled us to drive unit revenues to a level approaching the highs reached in 2000.”

Southwest shared that its profit more than doubled, to $333 million, or 40 cents per share, in the three months ended June 30. That compares with $144 million, or 18 cents per share, a year ago. Excluding gains from hedging its fuel purchases, the company said, it earned $273 million, or 33 cents per share in the most-recent quarter. Analysts polled by Thomson Financial had predicted earnings per share of 26 cents, according to media.

Southwest said revenue rose 26 percent to $2.45 billion from $1.94 billion a year ago, topping analysts' forecast of $2.3 billion. Shares gained $1.30, to close at $17.24 Wednesday.