Fuel costs tip scales for airlines
By David Koenig
Associated Press
DALLAS — AMR Corp., parent of the nation's largest carrier, American Airlines, and Continental Airlines Inc. said yesterday they lost money in the first quarter as high fuel costs more than offset increases in their passenger traffic.
Low-fare carrier America West Holdings Corp., which is in merger talks with bankrupt US Airways Group Inc., swung to a profit, thanks in part to its decision to purchase much of its fuel in advance at lower prices.
With six of the nine largest airlines in the United States expected to post first-quarter losses that could approach a combined $2 billion, Continental Chairman and Chief Executive Officer Larry Kellner predicted that more industry consolidation is likely. But he said his own airline would be cautious.
Fort Worth-based AMR lost $162 million, or $1 per share, for the three months ended March 31, compared with a loss of $166 million, or $1.03 per share, a year earlier. Revenue rose 5.3 percent to $4.75 billion and was just below analysts' forecast of $4.77 billion.
American's capacity was little changed in the quarter, but it filled 75.4 percent of its seats, up from 71.1 percent a year earlier.
American paid $346 million more for fuel in the January-March period than it did a year ago and expects to spend about $5 billion on fuel this year.
Excluding a tax credit, AMR would have lost $230 million, or $1.43 per share. That was narrower than the loss of $1.61 per share forecast by analysts surveyed by Thomson Financial. AMR shares rose 35 cents, or 3.4 percent, to $10.51 in trading on the New York Stock Exchange.
Houston-based Continental, the nation's fifth biggest carrier, lost $184 million or $2.77 per share, compared with a loss of $124 million, or $1.90 per share, a year earlier. Revenue rose 8.6 percent to $2.51 billion.
Continental said it boosted capacity by 4 percent in the quarter and was still able to fill 76.8 percent of its seats, up 5.1 points over the same period in 2004.
Excluding an $8 million gain related to a pension plan, Continental lost $192 million, or $2.89 per share. Analysts surveyed by Thomson Financial had expected a loss of $3.10 per share.
Shares of Continental, which said its fuel bill for the quarter was $137 million higher than the same period last year, fell 9 cents to $12.06 on the NYSE.
Tempe, Ariz.-based America West earned $33.6 million, or 62 cents per share, in the first quarter, compared to a loss of $1.6 million, or 4 cents per share, a year earlier. Revenue increased 11.3 percent to $723 million.
The results included a gain of $60.5 million from fuel hedging, or buying long-term options to buy fuel in the future at specific prices. The same practice has helped Southwest Airlines Co. remain profitable despite surging oil prices.
Shares of America West fell 31 cents, or 6.4 percent, to $4.50 on the NYSE as some investors reacted negatively to the news of the merger discussions with US Airways.
Major airlines have cited rising fuel prices in raising fares three times in the past two months. AMR Chief Financial Officer James Beer said higher fares only offset a fraction of the extra costs and made it clear the company must continue to cut other costs.
Helane Becker, an analyst with The Benchmark Co., said airlines will attempt to keep pushing fares higher, disappointing summer vacationers who have grown accustomed to waiting for last-minute deals.
