We got mixed news today, and I’m not talking about the dodgy earnings reports that investors rallied around at times today. I’m not even talking about the mixed market results that frequently showed between the major indexes.
What I am talking about is the two earnings reports that came out today. They read very differently, and it’s difficult to decide which - if either - to give more weight.
On the one hand, we have Continental Airlines, Inc (NYSE: ), which had to admit to a $213m loss between April and June, it’s going to have to make some switches and cuts, including the following:
- 1,700 job cuts
- A price hike for checked luggage
- Another price hike for reservations made over the phone
While Continental will doubtlessly save some money by chopping its work force down to a more manageable - and payable - size, who knows if that’s going to be enough in the end.
And one way or the other, right now, if we read the economy through a Continental lens, things aren’t just shaky: They’re flat out miserable.
But the airline is hardly the only company out there, so let’s turn to one of its more locally-minded competitors: Southwest Airlines Co. (NYSE: ).
Southwest has reported negative numbers over the last few quarters, but they managed to make a profit this time around, with $54 million net income to smile about. That was partially thanks to an 8.8% decrease in its operating revenues for the second quarter.
We can read the two reports together a few different ways. Southwest could have just done a better job of cutting costs and slashing prices than Continental. After all, while people are keeping their feet on the ground a lot more these days, that doesn’t mean they aren’t still flying.
Then again, Southwest deals with flights only within the U.S., where-as Continental flies internationally. And if consumers are prepared to spend the extra money for airfare, they’ll probably be a lot more likely to shell it out for a hop across a few states instead of a much more expensive jaunt across the sea.
Or, we could largely ignore the Continental report and focus on the Southwest results. That seems to be the method the markets prefer these days anyway.
Tuesday, July 21, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research
