- The Washington Times - Monday, November 13, 2006

The U.S. airline industry, besieged by bankruptcies and layoffs for the past five years, is poised to make money again.

“We are projecting the U.S. airline industry to return to profitability for the first time since [the September 11, 2001, terrorist attacks],” said Ray Neidl, an airline analyst with Calyon Securities.

And with several airlines on schedule to exit bankruptcy next year and oil prices falling, the outlook for 2007 is even better.

In an investment report released yesterday, Mr. Neidl predicts the U.S. airline industry will earn $2.3 billion this year and $5.6 billion in 2007.

The rebound is largely because of the resurgence of major “legacy” airlines, such as American, Continental, Delta and United airlines, analysts say.

Low-cost carriers such as Southwest Airlines and JetBlue Airways have wooed many passengers away from the major airlines in recent years. But after years of cutting costs and retooling their business models — the legacy carriers are returning to financial stability.

Partnerships with foreign airlines and the drop in fuel costs in recent months also have buoyed legacy airlines, said Mr. Neidl, who predicts they will earn $565 million this year.

“Legacy airlines are the big interest this year with investors,” he said. Low-cost carriers “are not the darlings they were last year.”

Shares of American Airlines parent AMR Corp. yesterdaysurpassed the price they reached the day before the terrorist attacks. The shares rose $1.52, or 5.2 percent, to $30.58 yesterday in New York Stock Exchange composite trading — the first time they topped their $29.70 closing price of Sept. 10, 2001. The stock has surged 82 percent in the past year.

“AMR has built itself a huge cash position and done a good job cutting its costs,” said Jim Corridore, a New York airline analyst with Standard & Poor’s. “The outlook has really brightened for the airlines that have done the hard work.”

Analysts expect American this year to report its first annual profit since 2000 because of higher fares, lower costs and strong travel demand. The average estimate was $1.89 a share in a survey of 12 analysts by Thomson Financial.

United Airlines parent UAL Corp. reported 2006 third-quarter net income of $190 million, its second consecutive profitable quarter since emerging from bankruptcy protection earlier this year. The company also posted a profit of $119 million in the second quarter, its first true profit since 2000.

Delta Air Lines, which filed for bankruptcy protection in September 2005, and Continental Airlines also reported third-quarter earnings higher than a year ago.

In a move analysts and investors view as encouraging, Delta last week announced plans to recall 1,000 laid-off flight attendants — in addition to 200 recalled in September — beginning in early 2007. The airline also recalled about 130 pilots this year and some maintenance workers.

Delta and Northwest are expected to emerge from bankruptcy during the first half of next year, analysts and airline officials say.

Meanwhile, Southwest Airlines, the nation’s biggest low-cost carrier, reported its net income plunged 77 percent in the third quarter to $48 million from $210 million a year earlier.

Southwest blamed the downturn on the dramatic rise in fuel costs this year, a foiled airline bomb plot in August and an overall softening in demand for air travel.

c This article is based in part on wire service reports.


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