First-quarter losses shrink for American, Northwest

By David Koenig
Associated Press

Northwest Airlines yesterday reported a first-quarter loss of $230 million, as higher fuel costs offset rising passenger revenue. Associated Press

Shares of American's parent, AMR Corp., soared by 9 percent, and other airline stocks also gained on the news.

Airliners are flying more full, helped by what officials called a budding recovery in business travel, but intense price competition led by low-fare rivals has capped revenue.

Northwest raised most U.S. leisure fares by 3 percent Tuesday night. Delta matched the increase, and industry experts said it appeared United and US Airways were doing the same, although neither airline immediately returned a call seeking confirmation.

Other recent increases have been rolled back after one carrier, often Northwest, balked. Terry Trippler, a travel consultant in Minneapolis, predicted this one will stick even if low-fare carriers don't go along.

"They want this fare increase, and they need it," Trippler said. "Just drive by a gas station and look what's happened to the price of fuel."

Besides raising fares, carriers are also turning to employees for cost-cutting measures.

Northwest chief executive Richard Anderson warned that his airline won't make money unless it wins concessions from its unions, which have been cool to the idea.

"It's still a rough environment for the airlines, both on fuel costs and yield" — revenue per passenger — said Ray Neidl, an analyst for Blaylock & Partners. "American is making better progress than Northwest because they've cut their labor costs already."

Analysts said airlines are also hurting themselves by adding flights before they can raise fares. The established carriers, however, are afraid of losing market share to low-fare rivals such as Southwest Airlines and JetBlue Airways, which are expanding.

"If they're growing, there's no reason why American Airlines shouldn't be growing," said American's chief executive, Gerard Arpey.

AMR said it lost $166 million, or $1.03 per share, far less than the $1.04 billion, or $6.68 per share, that the company lost a year earlier.

Analysts had expected a loss of $1.04 per share, according to a survey by Thomson First Call.

Revenue rose 9.5 percent to $4.51 billion from $4.12 billion.

Northwest reported a first-quarter loss of $230 million, or $2.67 per share, compared with a loss of $396 million, or $4.62 per share, a year ago.

The results were 3 cents per share worse than the forecast of analysts surveyed by Thomson First Call.

Revenue increased 9.6 percent to $2.6 billion, up from $2.38 billion a year earlier.