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Airlines see losses continue to pile up

Deep capacity cuts, checked bag fees and aggressive fare sales couldn't stop the airline industry's bleeding from the impact of bad bets on fuel hedges and the drop-off in demand.
Earns JetBlue
JetBlue's fourth-quarter pretax loss grew on a hefty charge on the value of some soured investments.Jin Lee / AP
/ Source: The Associated Press

Deep capacity cuts, checked bag fees and aggressive fare sales couldn't stop the airline industry's bleeding from the impact of bad bets on fuel hedges and the drop-off in demand due to the weak economy. After more carriers posted losses Thursday, the total fourth-quarter red ink for the top nine U.S. carriers by traffic rose to $4 billion.

As business and leisure travelers across the country watch what they spend amid the worst financial crisis in decades, the first quarter of this year, which ends March 31, will add more losses for several airlines, but the industry is eyeing profits after that, if fuel prices remain low and the economy doesn't weaken further.

In the meantime, the belt tightening at the nation's air carriers will continue.

"If I had to sum up the principles that we've been adhering to and that will guide our future decisions, they would sound a lot like something your parents or grandparents probably taught you: Don't buy things you can't afford, don't borrow money you can't pay back, don't agree to things you don't understand, and finally, if it doesn't seem right, it probably isn't," Alaska Air Group Inc. Chief Executive Bill Ayer said Thursday.

The Seattle-based operator of Alaska Airlines and Horizon Air reported that it swung to a $75.2 million loss in the fourth quarter. Houston-based Continental Airlines Inc. said it lost $266 million in the quarter. Tempe, Ariz.-based US Airways Group Inc. posted a $541 million quarterly loss and New York-based JetBlue Airways Corp. disclosed a $49 million pretax loss for the final three months of 2008.

Those reports followed losses posted earlier this week and last week by Atlanta-based Delta Air Lines Inc., Orlando, Fla.-based AirTran Holdings Inc., Chicago-based UAL Corp. — parent of United Airlines — and Fort Worth, Texas-based AMR Corp., parent of American Airlines. Not even usually profitable Southwest Airlines Co. was immune, as it also posted a fourth-quarter loss.

Advance bookings aren't encouraging, at least over the next two months, for several carriers.

Continental said in a regulatory filing that international bookings over the next six weeks are lagging behind last year's pace. Alaska Airlines' mainline occupancy rate based on advance bookings for March is down 3 percentage points year-over-year. Its parent blamed the fact that the Easter holiday falls in April this year.

Beyond that, airlines see brighter skies as they unwind fuel hedge contracts they entered into last year while oil prices were at record levels only to be stuck with them when oil prices made their dramatic slide. And they say the capacity many airlines have shed should pay dividends in the long run.

US Airways Chief Executive Doug Parker said the capacity cuts "have significantly softened the blow from the economic downturn that we as an industry now face."

The airlines have been trying to preserve cash to weather the economic crisis. Several also have said they will cut more capacity this year.

Some of the highlights of the fourth-quarter results reported by airlines Thursday:

Alaska Air Group's loss for the October-December period was equivalent to $2.08 a share, compared to a profit of $7.4 million, or 19 cents a share, in the same period a year earlier. Excluding special items, it posted a fourth-quarter profit of $16.4 million, or 45 cents a share. Analysts polled by Thomson Reuters expected Alaska Air Group to post a loss of 4 cents per share in the quarter, excluding one-time items. Revenue slid 3.1 percent to $827.1 million.

Continental's loss in the quarter was $2.33 per share, compared with a loss of $32 million, or 33 cents per share, a year ago. Excluding net charges of $170 million, Continental's loss would have been $96 million, or 84 cents per share. Analysts expected a loss of 89 cents per share. Revenue slipped 1.5 percent to $3.47 billion.

US Airways' loss in the fourth quarter was $4.74 per share, compared with a loss of $79 million, or 87 cents per share, during the same period in 2007. Revenue was $2.76 billion, down 0.6 percent from the fourth quarter of 2007. Not counting special items such as $234 million in paper losses on fuel hedges, US Airways said it would have lost $1.93 per share. Analysts expected a loss of $2.15 per share.

JetBlue said its fourth-quarter pretax loss compared with a pretax loss of $3 million a year earlier. The 2008 period included a charge of $53 million on the value of auction-rate securities, which rapidly lost value as the credit crisis spread. Excluding the charge, the airline said it would have reported pretax income of $4 million, compared with a pretax loss of $3 million in the 2007 fourth-quarter. Operating revenue rose 10 percent to $811 million. The airline said it will report net results in its annual 10-K, which it plans to file in mid-February, after evaluating the tax status of a special charge.