Wirraway
21st Oct 2004, 16:21
Fri "The Australian"
Major US airlines in freefall
A correspondent in Washington
October 22, 2004
US airlines dived deep into losses in the third quarter, stalling under the pressure of record fuel prices and near-lethal competition from budget carriers.
Four of the traditional carriers - American Airlines, Northwest, Delta and Continental - leaked red ink, even after unprecedented cost-cutting to skirt bankruptcy in an industry-wide crisis.
The two others - United Airlines and US Airways - remain in bankruptcy with their chances of escape in doubt.
"The situation is relatively bleak," said John Ash, managing director of Washington-based consultancy Global Aviation Associates. "It is driven in large measure by very low fares, excess capacity and very high fuel prices.
"Consequently, notwithstanding some major restructuring efforts undertaken by carriers - particularly American and, to a degree, Northwest - the outlook is not wonderful at this point."
AMC, parent of world No1 American, suffered a loss of $US214 million ($290 million) in the three months to September 30, after squeezing out a year-earlier net profit of $US1 million.
Total sales rose 3.4 per cent to $US4.76 billion.
"Our business was buffeted by three dramatic and harmful developments during the third quarter," AMR chairman and chief executive Gerard Arpey said.
"The first was record high fuel prices. The second was a weak revenue environment, which meant that despite our best efforts - and unlike other fuel-intensive businesses - we have been largely unable to pass the higher fuel costs on to our customers. The third development was the unprecedented series of hurricanes, which depressed revenue, increased costs and repeatedly disrupted an important part of our network."
It was the same story across the industry.
Northwest reported a net loss of $US46 million, reversing a year-earlier net profit of $US42 million. But revenue surged 13.4 per cent. "As in recent quarters, our operating performance was negatively impacted by record high fuel cost that continues to drive the dynamics of the airline industry," president and chief executive Doug Steenland said.
Continental posted a loss of $US16 million, after a profit of $US133 million a year before, even as sales climbed 8.4 per cent to $US2.56 billion.
Most worrying, Delta, which is fighting to avoid bankruptcy, said losses nearly quadrupled in the three months to September 30 to $US646 million, as sales rose 5.9 per cent to $US3.87 billion.
"Given Delta's heavy losses and dwindling liquidity, the company will likely have to decide whether to seek bankruptcy protection within weeks," Standard and Poor's analyst Philip Baggaley said. Mr Ash agreed. "I think Delta is going to have a horrendous time," he said.
US Airways also faced a challenge in escaping bankruptcy, Mr Ash said.
United, too, would have trouble returning to normal business unless it could cut away a huge liability with employee pension plans, which were underfunded by about $US7 billion, he said.
"Until they torch and replace their pension plans, particularly the pilot pension plans, they are not going to be able to emerge because they are not going to be able to attract fresh capital," he said.
Otherwise, United had some key strengths with a good network, healthy fleet and strong alliance, he said.
The US industry is heading for a shakeup. "By the end of next year, we could see a little different landscape, particularly for the legacy network carriers," he said.
AFP
==========================================
Major US airlines in freefall
A correspondent in Washington
October 22, 2004
US airlines dived deep into losses in the third quarter, stalling under the pressure of record fuel prices and near-lethal competition from budget carriers.
Four of the traditional carriers - American Airlines, Northwest, Delta and Continental - leaked red ink, even after unprecedented cost-cutting to skirt bankruptcy in an industry-wide crisis.
The two others - United Airlines and US Airways - remain in bankruptcy with their chances of escape in doubt.
"The situation is relatively bleak," said John Ash, managing director of Washington-based consultancy Global Aviation Associates. "It is driven in large measure by very low fares, excess capacity and very high fuel prices.
"Consequently, notwithstanding some major restructuring efforts undertaken by carriers - particularly American and, to a degree, Northwest - the outlook is not wonderful at this point."
AMC, parent of world No1 American, suffered a loss of $US214 million ($290 million) in the three months to September 30, after squeezing out a year-earlier net profit of $US1 million.
Total sales rose 3.4 per cent to $US4.76 billion.
"Our business was buffeted by three dramatic and harmful developments during the third quarter," AMR chairman and chief executive Gerard Arpey said.
"The first was record high fuel prices. The second was a weak revenue environment, which meant that despite our best efforts - and unlike other fuel-intensive businesses - we have been largely unable to pass the higher fuel costs on to our customers. The third development was the unprecedented series of hurricanes, which depressed revenue, increased costs and repeatedly disrupted an important part of our network."
It was the same story across the industry.
Northwest reported a net loss of $US46 million, reversing a year-earlier net profit of $US42 million. But revenue surged 13.4 per cent. "As in recent quarters, our operating performance was negatively impacted by record high fuel cost that continues to drive the dynamics of the airline industry," president and chief executive Doug Steenland said.
Continental posted a loss of $US16 million, after a profit of $US133 million a year before, even as sales climbed 8.4 per cent to $US2.56 billion.
Most worrying, Delta, which is fighting to avoid bankruptcy, said losses nearly quadrupled in the three months to September 30 to $US646 million, as sales rose 5.9 per cent to $US3.87 billion.
"Given Delta's heavy losses and dwindling liquidity, the company will likely have to decide whether to seek bankruptcy protection within weeks," Standard and Poor's analyst Philip Baggaley said. Mr Ash agreed. "I think Delta is going to have a horrendous time," he said.
US Airways also faced a challenge in escaping bankruptcy, Mr Ash said.
United, too, would have trouble returning to normal business unless it could cut away a huge liability with employee pension plans, which were underfunded by about $US7 billion, he said.
"Until they torch and replace their pension plans, particularly the pilot pension plans, they are not going to be able to emerge because they are not going to be able to attract fresh capital," he said.
Otherwise, United had some key strengths with a good network, healthy fleet and strong alliance, he said.
The US industry is heading for a shakeup. "By the end of next year, we could see a little different landscape, particularly for the legacy network carriers," he said.
AFP
==========================================