US Airways (NYSE:LCC) posted strong growth in revenue and net profit in the third quarter on higher passenger traffic and yield. Growth in passenger traffic was aided by significant capacity addition by the airline during the quarter. These additions were done at a time when several other airlines including Delta (NYSE:DAL) and United (NYSE:UAL) reduced their capacities. Net profit also benefited from lower fuel costs in the third quarter of 2012 compared to the third quarter of 2011. In the third quarter, total revenue was $3.5 billion up 2.8% y-o-y, and net profit was $192 million excluding special items, up from $95 million in the year-ago period. 
Higher passenger traffic and yield drive growth in third quarter earnings
The airline increased its capacity significantly in the third quarter on a y-o-y basis. Its available seat miles (ASMs) increased by 2.7% y-o-y in the third quarter. Capacity addition was the highest on Latin international routes at 5.5%, followed by 3.5% on Atlantic international routes and 2.5% on domestic U.S. routes.  This growth in capacity enabled growth in passenger traffic for the carrier in the third quarter. Its revenue passenger miles (RPM), an indicator of passenger traffic increased 2.6% y-o-y in the third quarter.
- American-US Airways Merger Receives Final Clearance For Take-Off
- US Airways And American Airlines Set To Merge After Settlement With DoJ
- US Airways And Alaska’s Results Glide Higher On Gains From Capacity Expansion
- US Airways’ Top Line Results Will Fly Higher On Capacity Expansion
- Weekly Airlines Note: US Airways And United
- Weekly Airlines Note: United, Delta, American And US Airways
In addition, the airline witnessed 0.6% y-o-y increase in yield. As a result, total revenue for the airline increased 2.8% y-o-y in the third quarter. 
Lower fuel costs add to earnings growth
Profit for the carrier benefited from lower fuel costs in the third quarter. The carrier incurred an average fuel price of $3.07 per gallon in the third quarter compared to $3.14 per gallon in the year-ago period. It consumed a total of 380 million gallons of fuel in the period, up from 375 million gallons in the third quarter of 2011. However, total fuel expenses declined 1.3% y-o-y to $893 million on lower average fuel price per gallon. As a result net profit on a GAAP basis, increased $169 million to $245 million in the third quarter. 
The carriers plans to continue to raise its capacity in the fourth quarter, and if the demand environment remains stable then US Airways will post strong growth in earnings for full year 2012 on a y-o-y basis.
We currently have a stock price estimate of $11.88 for the airline, nearly in line with its current market price. We are in the process of incorporating the third quarter earnings and shall update our analysis shortly.Notes: