(Adds revenue forecast, shares, background)
Oct 11 Top U.S. airlines on Tuesday forecast
better profit margins and revenue than expected for the third
quarter, as their cuts to seat supply propped up prices and as
the timing of Jewish holidays boosted September travel.
American Airlines Group Inc, the world's largest
airline, said it expects an adjusted pre-tax margin between 13
percent and 15 percent, compared to prior guidance of up to 14
percent. No.3 United Continental Holdings Inc forecast a
margin as high as 16 percent, from prior guidance of up to 15.5
Part of the boost is from the timing of two holidays - Rosh
Hashanah and Yom Kippur - when many Jews do not travel. This
year is just the fourth time since 1943 that both holidays occur
in October, whereas 71 percent of the time they have taken place
in September, JPMorgan analyst Jamie Baker said in a recent
research note. That means the dip in travel spending that
usually occurs during the holidays is shifted to the fourth
quarter this year.
The forecasts also suggest that moves by the airlines to
offer fewer seats on certain routes is paying off.
For months, major U.S. airlines have sold discounted tickets
so they do not lose customers to rapidly growing budget
carriers. Now that the peak summer travel period has ended, big
airlines are slowing their own growth with the hope that prices
will rise and customer loyalty will remain intact.
On Tuesday, American said it expects its flight capacity has
increased only 1.5 percent in 2016 over a year ago, compared
with prior plans that it would rise 2 percent. The airline also
said it expects unit revenue, which compares sales to capacity,
declined between 2 percent and 3 percent in the third quarter
versus its prior forecast of a drop of up to 5 percent.
United similarly offered rosier guidance for passenger unit
revenue because travelers spent more on last-minute trips than
expected, "driven by the timing of certain holidays."
Shares of American and United rose 2 percent and stayed flat
in morning trade, respectively.
(Reporting by Jeffrey Dastin in New York; Editing by Paul Simao
and Bill Trott)