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DALLAS—AMR Corp., whose American Airlines is the world’s
largest carrier, probably will post a second-quarter
loss today, heralding industry losses of as much as $910
million on rising jet-fuel costs.
“The
second quarter will be ugly with a capital ‘ugh,’” said
Henry Harteveldt, a Forrester Research Inc. analyst in
San Francisco.
An
80-percent surge in jet fuel in the past year reduced
airlines’ usual boost from the start of the summer
travel season. US carriers are grounding 433 jets and
cutting about 22,000 jobs to stem 2008 losses that the
Air Transport Association estimates may reach a record
$13 billion.
Delta
Air Lines Inc. and Southwest Airlines Co. may be the
only profitable carriers, based on analysts’ estimates.
Combined losses at the eight biggest US airlines will be
$910 million before special items, Merrill Lynch & Co.
analyst Michael Linenberg in New York projected on July
8. Delta also reports today.
AMR may
say it lost $319 million, its third- straight quarterly
deficit and the most of any US carrier for the period,
based on the average of six analyst estimates compiled
by Bloomberg.
A
$328-million first-quarter loss was the largest for Fort
Worth, Texas-based AMR since the last three months of
2005.
William
Greene, a Morgan Stanley analyst in New York, said he
expects the eight airlines to record combined losses of
about $785 million, while the average estimate of
analysts surveyed by Bloomberg is $787 million. The
number of estimates varied for each airline.
The
carriers racked up profits of $1.9 billion a year
earlier, the best quarter since 2000. The group’s
operating losses totaled $1.62 billion in the first
three months.
Airlines
are “just in shock,” said Michael Derchin, an analyst at
FTN Midwest Research Securities Corp. in New York. “They
never in their wildest dreams or scenarios dreamed oil
would be like this for this long. All the contingency
plans they never thought they’d need have been put into
action.”
Analysts
will be looking for clues about bookings beyond the
summer travel season. Demand typically falls in the
year’s last four months, a drop that may be steeper this
year as US consumer confidence hovers near its lowest
level since 1980.
“The
most important information will be the pricing and
revenue outlook,” said Philip Baggaley, a Standard &
Poor’s credit analyst in New York.
Future
fares and demand will help show whether carriers’ plans
for a 9-percent reduction in seating capacity will stem
the jump in fuel, which has surpassed labor as the
industry’s biggest expense. The job and capacity cuts
start after summer travel ends, and airlines say they’re
poised to shrink fleets and payrolls further.
“They’re
waiting to see what happens in the fall, and they’re
ready to move pretty quickly,” Derchin said. “They
already know they need to cut more, just based on where
oil is right now.”
Earnings
at Southwest, the largest low-fare carrier, again may be
protected by its strategy of locking in lower fuel
prices in advance, while Delta probably will benefit
from moves during its 2005-07 bankruptcy to reduce
operating costs, according to analysts’ estimates.
AMR and
Delta’s reports will be followed by Continental Airlines
Inc.’s on July 17. United Airlines parent UAL Corp., US
Airways Group Inc. and JetBlue Airways Corp. will
announce results July 22. Northwest Airlines Corp. will
release figures on July 23 and Southwest on July 24.
AMR said
July 2 that the quarter would include as much as $1.27
billion in writedowns for the costs of employee
severance and the lower value of jets being retired. UAL
said last week it would record non-cash charges of as
much as $2.7 billion.
AMR and
UAL are among the year’s worst performers among the 14
carriers in the Bloomberg US Airlines index, tumbling 68
percent and 90 percent. UAL’s decline is the biggest.
Through Tuesday, the market value of the eight largest
airlines slid 45 percent this year to less than $16
billion. |
