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High Fuel Prices Hamper Airline Results
Published on 31/01/2008 08:57

© Robin Guess
Northwest Airlines, AirTran Holdings and JetBlue Airways all posted fourth-quarter losses on Tuesday as high jet fuel prices continued to weigh on US carriers. But the airlines' shares rose on executives' optimistic comments that demand is holding strong despite the slowing US economy. JetBlue, which said it sees sharp gains in passenger revenue, surged 16 percent. The quarterly losses follow those posted in the last few weeks by American Airlines parent AMR, United Airlines owner UAL, and Delta Air Lines, underscoring the industry's vulnerability to oil prices, which have come off peak levels but remain high. "Fuel is the key issue," AirTran Chief Executive Bob Fornaro said. "The level of oil prices is even more important in the short run than even demand in the economy. That is something the whole industry feels, and we're all seeing a cost increase." With the slowing economy threatening to stall demand and oil prices boosting costs, the airline industry is battling to rescue a recovery that began in 2006 by raising fares and reducing plans to increase capacity. While airlines did a good job at reining in costs and boosting revenue in the fourth quarter, the future is still cloudy. Northwest, the No. 5 US airline, which exited bankruptcy last year, said it lost USD$8 million, in the fourth quarter. A year earlier, when results were skewed by bankruptcy items, it lost USD$267 million. Results for the fourth quarter included a USD$14 million pre-tax charge related to the sale of its remaining stake in regional carrier Pinnacle Airlines. Excluding that charge, Northwest said it broke even for the quarter. Northwest, which has been reported in merger talks with Delta, said revenue rose 3.9 percent to USD$3.1 billion. Its fuel expense rose 16 percent. Northwest ended the quarter with USD$3 billion in unrestricted cash. Low-cost carrier JetBlue said its quarterly net loss was USD$4 million, compared with a profit of USD$17 million a year earlier. Operating revenue totaled USD$739 million, representing growth of 16 percent. Operating expenses per available seat mile were up 4.5 percent to 5.4 cents, excluding fuel. Fuel prices rose 21 percent to USD$2.34 per gallon. The company forecast that its passenger revenue likely would increase by 10 percent to 12 percent year-over-year in the current quarter, while its costs were seen rising 9 to 11 percent. Excluding fuel, the carrier said its costs were likely to decline by 2 percent in the quarter. JetBlue announced plans to sell six aircraft this year and defer delivery of 16 new craft from 2010-2011 to 2012-2013 as it reins in expansion. "It's a very smart move in this environment to curtail their growth rate and concentrate on where they fly now instead of opening new markets, which is expensive and risky," said Calyon Securities analyst Ray Neidl. AirTran posted a wider-than-expected fourth-quarter loss, burdened by a 35 percent jump in its fuel bill. AirTran posted a net loss of USD$2.2 million, but the latest quarterly loss was narrower than the loss of USD$3.6 million a year earlier, as the company raised fares and packed more passengers on its planes.  (Reuters)
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