Air Transport World

Spring forward: higher fuel costs mask improvements at US airlines in June quarter.(Finance)

The nine largest US passenger airlines in aggregate reported a net loss of $2.26 billion for the spring quarter ended June 30 compared to a net profit of $171.9 million in the year-ago period (the 10th, ATA Airlines, did not release results in time to be included in this report). Extraordinary writeoffs at Delta Air Lines totaling $1.65 billion and soaring fuel prices masked significant improvement at most carriers, however. Comparisons to the year-ago period also are distorted by the $2.1 billion in federal security taxes rebated to the industry in May 2003, which mitigated the impact of the Iraq war and SARS on US airlines last year.

At the operating level, the difference in profit between the two years was a scant $7 million, reflecting the industry's success at reducing unit costs (excluding fuel) over the past 12 months. On the revenue side, aggressive capacity additions in transcon markets--particularly by low-cost carriers--meant that airlines were unable to leverage record load factors into higher ticket prices. Yield was virtually unchanged year-over-year, but the improved load factor pushed unit revenue up 2.1%.

Special items helped American Airlines parent AMR Corp. to a net profit of $6 million in the quarter in contrast to a net loss of $75 million in the year-ago period. Excluding special items from both periods, AMR lost $25 million in the 2004 quarter, narrowed from a $357 million net loss last year. Total operating revenue rose 11.7% to $4.83 billion while operating expenses were up just 2.4% to $4.63 billion despite a 41.7% jump in fuel expense. This resulted in operating income of $196 million, up sharply compared to operating income of $87 million in the 2003 quarter. Excluding special items, operating profit was $165 million versus a loss of $195 million. For the six months ended June 30, AMR's net loss narrowed to $160 million from $1.12 billion.

UAL Corp., parent of United Airlines, lost $247 million in the quarter, including $144 million in reorganization charges primarily consisting of noncash items caused by the rejection of aircraft. …

Log in to your account to read this article – and millions more.