EARNINGS PREVIEW: US Airlines Seen Posting Losses Again
April 08 2009 - 10:25AM
Dow Jones News
TAKING THE PULSE: U.S. airlines are again seen posting losses as
demand continues to slump even as fuel prices have dropped. When
oil prices began falling sharply from their record peak last
summer, carriers were convinced that savings in jet fuel - their
biggest expense - would more than make up for any drop in travel
brought on by the recession. But demand is sliding much more
quickly and significantly than airlines expected, prompting
projections that the industry will be forced to cut more
capacity.
And now, as fuel prices edge higher, U.S. airlines are facing a
difficult choice over how to manage their fuel costs without
repeating last year's costly mistakes. Airlines had been hedging
fuel prices far in advance, but after oil maxed out in July, they
suffered huge write-downs because they were forced to continue to
pay peak prices even after the recession cut back the number of
passengers they served.
COMPANIES TO WATCH:
AMR Corp. (AMR) - reports April 15
Wall Street Expectations: Analysts surveyed by Thomson Reuters
anticipate a loss of $1.52 a share on revenue of $4.72 billion. The
American Airlines parent had a year-earlier net loss of $1.32 on
revenue of $5.7 billion.
Key Facts: AMR said in March it expects American's first-quarter
revenue per available seat mile, a key performance measurement, to
fall up to 11% on falling demand. In response, the number of
available seats is anticipated to fall further later this year.
Fitch lowered its credit ratings on AMR and American to highly
speculative last month, citing the "collapse" in industrywide
demand as the carrier continues to burn through cash.
Southwest Airlines Co. (LUV) - reports April 16
Wall Street Expectations: The discount carrier is seen posting
earnings of 3 cents a share and revenue of $2.44 billion, down from
5 cents and $2.53 billion, respectively.
Key Facts: The expected profit, excluding fuel-hedging impacts,
comes after two straight quarters of net losses, the first since
1991. They were caused by the plunge in fuel costs overwhelming
Southwest's vaunted hedging program. Chief Executive Gary Kelly is
navigating the tough economy by expanding into new markets and
tinkering with the carrier's low-cost service, adding flights to
heavily trafficked U.S. airports.
Delta Air Lines Inc. (DAL) - reports April 21
Wall Street Expectations: Analysts forecast a loss of $1.01 on
revenue of $6.79 billion, compared with a prior-year loss of $16.15
a share on revenue of $4.77 billion. Last year's results included a
$6.1 billion fuel-hedging write-down.
Key Facts: Delta CEO Ed Bastian said last month the carrier
would pull an additional 10% from its international capacity this
year on top of previously announced systemwide cuts of 6% to 8%.
The company has also said it expects to report a "solid" full-year
profit despite forecasting a 14% drop in operating revenue for the
first quarter. It said last month it expected to break even before
taxes in the first quarter and post a profit in the second
quarter.
Continental Airlines Inc. (CAL) - reports April 22
Wall Street Expectations: Analysts project a loss of $1.13 a
share and revenue of $3 billion. A year ago, the company posted a
loss of 81 cents on revenue of $3.57 billion.
Key Facts: The company aims to switch to the Star Alliance of
global carriers from the rival SkyTeam grouping by late October,
saying a move would provide a better defense against the industry
downturn and cement ties with new partner United Airlines. The
company said last month that declining business travel was cutting
into its bottom line, and key measures of profitability were
deteriorating faster.
UAL Corp. (UAUA) - report date to be announced
Wall Street Expectations: The United Airlines parent is slated
to post a loss of $4.27 a share on revenue of $3.8 billion,
compared with a year-earlier loss of $4.45 a share on revenue of
$4.71 billion.
Key Facts: UAL said in March it expected first-quarter passenger
revenue per available seat mile to fall 12% to 13%. Avondale
Partners analyst Bob McAdoo called that worse than other legacy
carriers' predictions despite United undertaking the industry's
deepest capacity cuts. Looming is labor negotiations with six U.S.
unions in April. Employees are working under a pact negotiated in
bankruptcy court, when the airline significantly cut costs to
reorganize.
(The Thomson Reuters estimates and year-ago net may not be
comparable because of one-time items and other adjustments.)
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com