US Air, United lead carriers higher on continental revenue
US Airways Group Inc. and United Airlines parent UAL Corp. rose, pushing an industry index to a six-week high, after Continental Airlines Inc. beat analysts' estimates for monthly unit revenue.
The Bloomberg U.S. Airlines Index of 12 carriers climbed as much as 5.7 percent to its highest intraday value since April 20. Continental said late yesterday that May revenue from each seat flown a mile rose in a range of 23 percent to 24 percent.
Continental's report, the first issued for May among major U.S. carriers, signals a stronger return of business travelers who pay higher fares. The results topped estimates for a 17 percent increase from Jamie Baker, an analyst with JPMorgan Chase & Co., 17 percent to 18 percent from CRT Capital Group LLC's Michael Derchin and 22 percent by Kevin Crissey at UBS AG.
The results "were driven by higher-than-anticipated prices, which we attribute to a rebound in higher fare-paying business travelers and fare surcharges implemented during peak travel days," Derchin wrote in a report.
Yield, or average fare per mile, gained as much as 20 percent in May, he estimated. Continental also benefitted from lower jet-fuel prices last month, said Derchin, who rates Continental "fair value."
Continental's revenue "has positive implications for all of the U.S. airline stocks, but particularly those with international exposure," Crissey, who recommends buying Continental shares, wrote in a report.
US Airways climbed 69 cents, or 8 percent, to $9.33 at 2:56 p.m. in New York Stock Exchange composite trading, while Continental rose $2.15, or 11 percent, to $22.44; American Airlines parent AMR Corp. increased 55 cents, or 7.3 percent, to $8.12; and Delta Air Lines Inc. rose 55 cents, or 4.1 percent, to $14.09. UAL increased $2.23, or 12 percent, to $21.58 on the Nasdaq Stock Market.
US Airways reached a 52-week high of $9.55 today, as did Alaska Air Group Inc., at $49.75. Alaska, the parent of Alaska and Horizon airlines, rose $3.54, or 7.7 percent, to $49.72 at 2:56 p.m. Bank of America Corp. restarted coverage of both carriers today with "buy" recommendations.