US Airways posts fourth-quarter profit

US Airways Group Inc. and United Continental Holdings Inc. beat Wall Street earnings expectations Wednesday, sending their shares higher and signaling the airline industry is on more solid footing.

As more people flew and paid higher ticket prices, US Airways, Philadelphia's dominant carrier, reported its first profitable fourth quarter since 2006.

"The company demonstrated solid year-over-year improvement to the bottom line," Deutsche Bank Securities airline analyst Michael Linenberg said in a client note. The full-year 2010 profit was "the second-best result ever for US Airways," Linenberg wrote.

US Airways said fourth-quarter net income was $28 million, or 17 cents a share, up from a loss of $79 million, or 49 cents a share, in the year-ago quarter. Analysts polled by Thomson Reuters expected earnings of 6 cents a share.

Quarterly revenue rose nearly 11 percent to $2.91 billion from $2.63 billion. Excluding fuel and special items, unit costs fell 1.7 percent.

United Continental, the world's largest airline, posted a profit, compared with a year-earlier loss, excluding merger-related costs. United and Continental combined on Oct. 1.

Higher fares and increased traffic during the holidays helped airlines report better fourth-quarter results, but rising fuel prices are a worry.

With corporate and leisure travelers returning, airlines including US Airways and United Continental have increased fares three times since the first of the year.

Cost controls, reduced capacity - seats and flights - and new revenue streams from fees for checked bags, choice seats, pillows, and blankets have boosted the industry's bottom line.

"The challenge, of course, is sustaining it," US Airways chief executive Doug Parker said on a conference call. "We are profitable now because of the steps we took to get through the crisis in 2008 and 2009. We feel good about 2011 and the years to follow."

US Airways said it will increase seat capacity only slightly this year, by 1 percent on domestic flights and 7 percent on international routes, with new service to Madrid, Spain; Dublin, Ireland; and Sao Paulo, Brazil, from its Charlotte, N.C., hub.

The new United said it earned $160 million, or 44 cents per share, an improvement of nearly $350 million compared with the same period last year, and beating analysts' estimates of 23 cents per share.

Including $485 million in merger costs, the Chicago-based airline lost $325 million, or $1.01 a share, compared with a loss of $266 million, or 85 cents a share, a year earlier, the airline said.

Revenue rose 15 percent to $8.4 billion, from $7.3 billion a year ago. Operating expenses also rose 15 percent, with fuel costs rising nearly 27 percent.

United chief executive Jeffery Smisek said the airline recently raised fares and was prepared to cut capacity to respond to rising fuel prices, up 18 percent this quarter vs. a year ago.

"We implemented several fare increases over the past few weeks," Smisek said on an investor call. "We remain committed to capacity discipline and we're carefully evaluating our summer, fall, and winter schedules to ensure that we have the appropriate capacity to allow us to recover the higher cost of doing business."

US Airways also said it may trim capacity in the fall to control costs and keep planes full after the peak summer travel season.

"As we rolled over to a new calendar year, we feel very good about the revenue environment," said US Airways president Scott Kirby. "Business demand is strong. "

For the full year, US Airways made a profit of $502 million, or $2.61 per share, compared with a loss of $205 million, or $1.54 a share, in 2009.

US Airways shares closed up 67 cents to $10.80. United shares were up $1.70 to $25.79.