- The Washington Times - Thursday, January 22, 2009


The major U.S. airlines have grounded aircraft and eliminated flights, but those moves might not be enough in the face of a recession that is choking demand for air travel. Their struggles, however, could be working to the benefit of consumers.

American Airlines and United Airlines said Wednesday they lost more money in the fourth quarter. United parent UAL Corp. lost $1.3 billion, hurt by a wrong bet on the direction of oil prices. The company plans to cut 1,000 more jobs.

Airline stocks tumbled, pushed lower by a bump in oil prices.

Shares of American parent AMR Corp. plunged $2.48, or 23.7 percent, to $7.98, as airline officials said advance bookings were weak, especially for March. UAL shares sank 71 cents or 6.1 percent, to $10.91.

UAL and AMR were the first major U.S. airline companies to report results for the final quarter of 2008, and the losses were expected.

Fort Worth-based American, the nation’s second-largest airline behind the combined Delta and Northwest, cut hundreds of daily flights last fall and said Wednesday it would trim capacity again in 2009. United also expects capacity to drop this year.

The good news for consumers is that airlines are slashing some fares to put passengers on their planes, a trend likely to continue at least into late spring.

“It’s a buyer’s market, just like in real estate or retail,” said Tom Parsons, chief executive officer of the travel Web site BestFares.com.

AMR Chairman and Chief Executive Officer Gerard Arpey said his airline faces a wobbly economy, weaker demand for travel and potentially volatile fuel prices.

Still, Mr. Arpey said he was “guardedly optimistic we can regain momentum in 2009.” AMR lost $2.07 billion in 2008, as high fuel prices and a recession ended a run of two straight profitable years.

In the fourth quarter, AMR lost $340 million, or $1.22 per share. Excluding write-offs, the carrier would have lost $214 million, or 77 cents per share, matching the forecast of analysts surveyed by Thomson Reuters. A year earlier, the company lost $184 million or 74 cents per share excluding special items.

Fourth-quarter revenue was $5.47 billion, below the $5.52 billion predicted by analysts.

American announced it would take fewer deliveries of new planes through 2010 due to delays caused by a strike at Boeing Co. American will get 68 Boeing 737s to replace some of its older, fuel-guzzling MD-80s, instead of 76 in the next two years. And because of the weak economy, the company said, it won’t make up the difference by delaying the retirement of MD-80s.

That will cut American’s capacity by more than 6.5 percent in 2009 - about one percentage point more than previously forecast.

AMR forecast higher costs, excluding fuel, for this year, mostly due to larger expenses to cover the declining value of assets held by the company’s pension plans.

Ray Neidl, an analyst with Calyon Securities, said the pension liability might have caught investors off guard and contributed to the slide in AMR shares. He said weak bookings also could have been a factor.

“Clearly we’re in an environment where demand is weak,” said AMR Chief Financial Officer Robert Horton. “March in particular looks weak.”

Still, analysts are betting on a recovery to begin by early summer. They expect AMR to lose 21 cents per share in the first quarter but earn $2.27 per share for the entire year - even with a projected 6.6 percent revenue decline.

Chicago-based UAL lost $1.3 billion, or $9.91 per share, in the fourth quarter, compared with a loss of $53 million, or 47 cents per share, a year earlier. Much of the loss was due to fuel-hedging deals designed to protect against rising prices. When oil prices fell, the hedges turned into losing bets, and United was stuck paying above-market prices for fuel.

Without costs related to the fuel-price bets and other items, UAL said it would have lost $547 million, or $4.22 per share. On that basis, analysts expected a loss of $4.42 per share.

Revenue fell 9.6 percent to $4.55 billion, close to analysts’ forecast of $4.54 billion.

UAL said it would eliminate 1,000 salaried and managerial jobs this year on top of 1,500 job cuts announced last year.

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