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Record fuel costs hit US airlines’ profits
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Written on: 29. 04. 08 [13:36]
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coffeeplease
 Board FOModerator
registered since: 31.10.2007
Posts: 71
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Continental Airlines swung to a quarterly loss, while rival Southwest Airlines eked out a small profit on Thursday amid record fuel costs.
Both US carriers followed American Airlines in taking steps to brace for losses that Wall Street expects to deepen as an economic slowdown saps demand for air travel.
Continental, whose fuel expenses surged 53 per cent from a year earlier, plans to remove 14 older, less fuel-efficient jets from its fleet and trim 5 per cent of its domestic flight schedule this autumn.
The company also plans to cut regional capacity, and is seeking to extract better terms from its contract with ExpressJet, which flies many of Continental’s commuter jets.
Southwest deferred the delivery of some aircraft and continues a “rigorous review of our flight schedule to eliminate non-productive flying”.
Continental reported a first-quarter loss of $80m, or 81 cents a share, compared with net income of $22m, or 21 cents, a year ago. Revenue jumped 12 per cent to $3.57bn.
“In this fuel environment, we must reduce our domestic capacity to help reduce our losses in the domestic system,’’ Jeff Smisek, Continental’s president, said on Thursday in a statement.
The Houston-based carrier paid $100 to Northwest Airlines, redeeming its so-called golden share provision and clearing the carrier to pursue a merger unencumbered by Northwest’s right to block the deal. Continental was granted the right to buy the golden share when Northwest agreed this week to merge with Delta Air Lines
Continental has had preliminary merger talks with United Airlines and American, two of its bigger competitors, people familiar with the carrier have said.
Southwest’s consistent profitability and financial strengths have helped the Dallas-based airline hedge against well over half of its fuel needs even as oil prices spiralled to $100 and beyond.
For the year Southwest’s derivative contracts cover more than 70 per cent of its estimated fuel consumption, at an average price of about $51 a barrel.
First-quarter earnings slipped 63 per cent to $34m, or 5 cents a share. Fuel costs jumped 34 per cent from a year earlier. Southwest said revenue climbed 15 per cent to $2.53bn.
“Traffic thus far in April has been solid, and bookings for the remainder of the second quarter 2008 appear strong,” Gary Kelly, Southwest’s chief executive, said in a statement.
Source: FT
Whether related or not to the peak oil issue remains to be seen. But thought it fits better into this category as it is likely that the fuel price will remain high due to political instabilities, envoronmental restrictions and/or possible shortages in the future.
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