For US airlines the question now is, which will fall farther, faster: fuel or revenue? As they go deeper into the year's first quarter, the carriers are finding that the optimism of the holidays may have been misplaced and even the most rosy-tinted lenses cannot hide the reality of rapidly declining revenues.
The total fourth-quarter red ink for the nine largest US carriers by traffic is on track to pass $4 billion and as business and leisure travellers across the country watch what they spend amid the worst financial crisis since the Great Depression, the first quarter is not likely to be much brighter.
"We all know it takes a lot of revenue erosion to offset the benefit the industry will reap from extraordinary capacity reductions and breathtaking declines in fuel," says Gary Chase, who follows US airline securities for Barclays.
"However, now comes the hard part - the part where we actually have to observe the revenue decline. With revenue falling quickly, as it always does, faith is suddenly hard to come by."
Even the optimists - and there are still quite a few - may have to temper their outlook. Some analysts such as Bank of America/Merrill Lynch airline guru Mike Linenberg still think that lower fuel costs will lead to an eventual full-year 2009 industry profit.
But for the cynical, the short-sighted and those driven by the numbers that are now available, it is hard to spot the light at the end of the very long tunnel that is ahead of the industry.
Michael Derchin, the FTN Midwest Securities airlines analyst who has been bullish, has reversed his most recent forecast.
"The first-quarter unit revenues outlook is shaping up worse than we had forecast only a week ago prior to earnings season. It appears that bookings fell off dramatically beginning in the second week of January and the advanced book load factor is looking particularly weak for international service," Derchin points out.
Consider Continental Airlines, generally thought of as a candidate for profitability. Its president and chief operating officer, Jeff Smisek, said in announcing its fourth-quarter and full-year loss: "In addition to business yield and bookings impacting our mainline domestic operations, we started seeing some weakness in leisure yields as well.
"During peak periods, leisure yields are holding up relatively well, but we are seeing some negative pressure on leisure yields and traffic in the non-peak period. This is driving deeper industry sale fare discounts in particular markets, as well as sale fares extended through May instead of March, like we'd typically see."
And Smisek noted the industry-wide trend of a collapse in premium traffic internationally: "Internationally, we're seeing a significant degradation of front-cabin unit revenues."
Even American Airlines, which enjoyed unit revenue growth on international routes, including an 11% fourth-quarter increase across the Pacific, is not sustaining that performance into the first quarter.
American chief financial officer Tom Horton says mainline international book load factors are down roughly eight points.
The outlook, if not gloomy, is murky. US Airways president Scott Kirby says: "I don't know how anyone could give a credible forecast for the full year." The carrier, which has been aggressive in implementing ancillary fees, says it took in about $100 million in the quarter from a la carte charges and is on track to take in between $400 million and $500 million for the full year.
Continental and US Airways, however, are relatively smaller than the biggest fish, Delta Air Lines, and at Delta the outlook is similarly murky, says the carrier's president Ed Bastian. "The clarity of our view on the demand picture is very muddy," he notes. Delta is the largest carrier now that it has absorbed Northwest.
Bastian adds: "Domestic book load factors are down two to four points for February and March and advanced yields are down five to seven points. The recession is clearly causing leisure customers to rethink or postpone some of their discretionary travel decisions.
"On the corporate side, companies continue to trim travel budgets and, as a result, business travellers are purchasing their tickets farther in advance to take advantage of lower fares and they're flying the front cabin much less often."
However, Delta chief financial officer and senior vice-president Hank Halter says: "We expect the decline in fuel expenses to offset any revenue softness by at least one to two points in 2009, which is going to be a very cash positive story for us."
Halter adds that Delta plans to remove between 40 and 50 of its mainline jets from the fleet in 2009 as it trims seating capacity by between 6% and 8%, and will "monitor the demand environment" and cut more deeply if it needs to.