• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

American, Continental See Quarterly Profits, Say Fuel Costs Are a Worry

Posted on: Thursday, 21 July 2005, 06:00 CDT

FORT WORTH -- American and Continental airlines Wednesday each reported small but significant profits as evidence mounts of modest improvement in industry financial conditions.

Those profits by the Texas-based carriers follow discount king Southwest's $159 million second-quarter profit, reported last week.

AMR, parent of American, the world's largest airline, earned $58million in the April-June quarter, or 30 cents a share. It was the first quarterly profit AMR has achieved without the aid of one-time items since the fourth quarter of 2000.

Continental, the USA's No.5 carrier, earned $100 million including one-time items, or $1.26 a share. Excluding one-time items, Continental's profit was $53 million, or 69 cents a share.

A strong economy and surging international travel demand are factors in the improved performance. But strong demand in the USA also has made recent fare increases possible.

American CEO Gerard Arpey also credited the fare restructuring launched in January by Delta, called SimpliFares, with stimulating demand among both leisure and business travelers. American followed Delta with its own version.

The changes resulted in deep cuts in last-minute fares, those usually paid by business travelers.

More business travelers, who previously had been avoiding higher-priced last-minute tickets, are now willing to pay the posted prices, Arpey said.

Consumers are responding favorably to the revamped structure, which offers lower fares and is easier to understand, Arpey said.

Last week, Delta raised its cap on one-way coach fares by $100, to $599. Most carriers followed.

Both airlines said high prices for fuel continue to be a major problem. American's fuel costs in the second quarter rose 47% from the same period last year to $1.35 billion. Continental's fuel bill jumped nearly 49%, to $575 million.

The companies agreed in their assessment that fuel prices appear headed even higher this fall. CFO Jeff Misner said he expects Continental to pay about $1.82 per gallon for jet fuel in the third quarter, vs. $1.63 a gallon last quarter.

Continental CEO Larry Kellner cited labor cost reductions -- $418 million annualized -- as the reason for the profitable quarter.

Through the first six months, Continental has lost $86 million; AMR, $104 million.

Analysts expect JetBlue to report a small profit when it reports quarterly results today, according to Thomson Financial. America West today is likely to report a small loss, according to Thomson's consensus of analysts.

Delta, also reporting today, and Northwest, reporting Tuesday, are expected to register large quarterly losses, Thomson says.

The U.S. industry's losses this year are on track to exceed $5 billion.

Source: USA TODAY

More News in this Category