CHICAGO (Reuters) – Three major U.S. airlines said on Thursday the U.S. government partial shutdown had not yet had a major financial impact but a tipping point might be near.
FILE PHOTO: An American Airlines jet taxis on the runway at Washington National Airport in Washington, U.S., August 9, 2017. REUTERS/Joshua Roberts
The carriers expressed their concerns on a day they reported quarterly earnings that beat Wall Streets expectations thanks to healthy passenger demand.
“It is maddening … No one can predict what impact it will have as it continues,” Southwest Airlines Chief Executive Gary Kelly said of the shutdown.
A Reuters poll of economists showed that U.S. economic growth will take a hit this quarter from the government shutdown, in its 34th day and the longest in U.S. history. Airlines in turn will feel the impact because their fortunes are tied closely to the health of the economy.
As a result of the shutdown, airport security workers and air traffic controllers continued to go without pay, stretching staffing and creating long lines at some airports and flight delays.
Federal workers who oversee route authorizations and aircraft certifications were also furloughed because of the shutdown.
Southwest said the shutdown was delaying its plan to launch service to Hawaii, which was targeted for early this year.
The Republican-led U.S. Senate planned votes on Thursday for competing proposals to end their impasse, both of which were likely to fail.
Most airlines said the financial impact of the shutdown thus far had been limited, but JetBlue Airways Corp Chief Executive Robin Hayes warned that the U.S. aviation system is nearing a “tipping point.”
“And the longer this goes on, the longer it will take for the air travel infrastructure to rebound,” Hayes said.
No. 1 U.S. carrier American Airlines said revenue per mile flown, a closely watched measure of performance that compares sales with flight capacity, would be flat to up 2 percent in the current quarter, taking into account the shutdown, which it said was affecting bookings of 14 days and less.
“We encourage the government to get reopened,” American Chief Executive Doug Parker said.
Still, American said overall demand, including for corporate travel, remained strong, and forecast $1 billion of additional revenue in 2019 as it continues to expand its Premium Economy product and adds gates at its Dallas-Fort Worth and Charlotte hubs.
The company, based in Fort Worth, Texas, forecast an increase in full-year earnings per share of 21 percent to 65 percent, compared with the 30 percent expected by analysts on average, according to IBES data from Refinitiv.
It said net income, excluding special items, rose 8.3 percent to $481 million, or $1.04 per share, in the fourth quarter. That beat analysts’ estimate of $1.01 per share.
Total operating revenue rose 3.1 percent to $10.94 billion.
Southwest, the fourth-largest U.S. airline by passenger traffic, said revenue per available seat mile would rise in the 4 percent to 5 percent range in the first quarter after a 1.8 percent increase in the fourth quarter.
Net income at Southwest, a low-cost carrier with a reputation as employee and customer friendly, fell to $654 million, or $1.17 per share, in the fourth quarter, from $1.75 billion, or $2.94 per share, a year earlier. That beat analysts’ average estimate of $1.07, according to IBES data from Refinitiv.
The year earlier quarter included a tax benefit of $1.3 billion.
New York-based JetBlue, the sixth-largest U.S. airline, also posted a fourth-quarter profit on Thursday above Wall Street estimates.
The profit beats, which mirrored solid results from Delta Air Lines and United Airlines earlier this month, boosted shares and eased concerns about the impact of slower global economic growth.
Shares of American and Southwest were each about 5 percent higher at mid-afternoon while those of JetBlue were up 4 percent, lifting the broader Dow Jones U.S. Airlines Index .
Reporting by Tracy Rucinski in Chicago and Ankit Ajmera in Bengaluru; Editing by Nick Zieminski and Steve Orlofsky
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