AirTran Holdings, Inc. (NYSE: AAI) - Q4 2010 Earnings Preview
Tuesday, January 25, 2011 12:40 PM

US-based airways company AirTran Holdings Inc. (NYSE: AAI) is expected to report its fourth quarter earnings on January 28, 2011. In the quarters ended September 2010, and June 2010, the company's earnings fell short of analysts' consensus estimates by 29.41% and 7.69%. In the quarter ended March 2010, though the company's reported exceeded analysts' consensus nevertheless they were in red. However, in the quarter ended December 2009, the company's reported earnings exceeded analysts' consensus estimates by 133.33%.

AirTran Holdings, Inc. conducts all of its flight operations through its wholly owned subsidiary, AirTran Airways, Inc. It operates scheduled airline service throughout the United States and to selected international locations. Approximately half of its flights originate or terminate at its hub in Atlanta, Georgia and it serves a number of markets with non-stop service from its focus cities of Baltimore, Maryland, Milwaukee, Wisconsin and Orlando, Florida. As of February 1, 2010, the Company operated 86 Boeing B717-200 aircraft (B717) and 52 Boeing B737-700 aircraft (B737) offering approximately 700 scheduled flights per day to 63 locations in the United States, including San Juan, Puerto Rico, and to Orangestad, Aruba, Cancun, Mexico, and Nassau, The Bahamas.

The company reported a net profit of $36.3 million or $0.22 per diluted share for the third quarter of 2010. During the quarter, the Company reported operating income of $56.7 million. During this period, the Company also achieved an all-time record for traffic (revenue passenger miles), and second highest load factor in Company history. AirTran Airways also established record setting operational metrics during the quarter, including the highest ever performance in on-time arrivals at 83.4 percent. In July alone, AirTran Airways served more than 2.4 million customers and achieved a load factor in excess of 88 percent. The Company continued to rank among the top of the industry in completion factor, mishandled baggage rate and the number of customer complaints the Department of Transportation receives.

For the fourth quarter ended December, 2010, analysts' EPS estimates range from a low of ($0.01) per share to a high of $0.13 per share, compared to the analysts' consensus estimate of $0.07 per share or $0.07 per share in the year ago quarter. Analysts' revenue estimates for the fourth quarter range from a low of $639.30 million to a high of $671.53 million, compared to a consensus estimate of $656.22 million or $598.43 million in the same quarter a year ago. For the quarter ended December 31, 2010, the current consensus EPS forecast has been downgraded to $0.07 per share, from $0.08 per share estimated 7 days ago. Q4 earnings revised down due to increasing operating expenses (mainly fuel costs).

During the third quarter, AirTran Holdings, Inc., entered into a definitive merger agreement to be acquired by Southwest Airlines (NYSE: LUV). Completion of the transaction, which will require both regulatory and shareholder approvals, is expected to close by the first half of 2011.

In the last 52 weeks, AirTran's stock has been trading in the range of $4.22 and $7.50. In the last 52 weeks, the company's stock has gained $2.01 or 36.81% to close at $7.47 on January 19, 2011. I forecast 2011's EPS at $0.5, and 2012's at $0.6. Based on the possible acquisition, EPS estimates, I set a one year target price of $8.20.

Delta Air Lines, Inc. (NYSE:DAL) earnings were released on January 18,2011.



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