DAVID FIELD / WASHINGTON DC
Attempts to raise fares failed as passengers and rest of industry refused to accept them
US major carriers have reported first-quarter losses totalling $2.4 billion - a disastrous period beaten only by the fourth quarter of 2001.
During the first quarter even Southwest Airlines made just $21 million in net earnings.
The airlines entered the second quarter trying to push through a fare hike to help reduce losses, but the move was not accepted by passengers or the rest of the industry and was abandoned.
Analysts are predicting losses for this quarter to drop to $1 billion, although only Southwest and Continental Airlines are expected to make money in this quarter. UBS Warburg analyst Sam Buttrick forecasts a full year industry loss in the $3-3.5 billion range. "For 2003, we are projecting a break-even to $1 billion profit," he adds.
Continental chairman Gordon Bethune is wary of predicting profit before the third quarter, and blames low fares. In March, domestic unit revenue fell by 10.6% versus a year ago, a slight improvement over February's 11% decline year-on-year. This may be enough to encourage further fare increases. Merrill Lynch analyst Michael Linenberg says: "The recent attempt by some industry players to increase fares is an indication that pricing leverage is being felt."
Bethune also blames overcapacity for the continued losses. He had anticipated a 15% decrease in industry capacity, but puts the real drop at about 8%. Analysts predict a second quarter capacity drop of about 14% year-on-year, although carriers will make fleet decisions as late as possible, says Deutsche Bank analyst Susan Donofrio.
Like its larger counterpart Southwest - but unlike any of the other major carriers - low-cost airline JetBlue turned in a net profit in the quarter. The airline, which floated on the New York NASDAQ exchange earlier this month (Flight International 23-29 April), has more than doubled its traffic since last year. The airline now plans to strengthen its existing routes in the western USA, serving its destinations with an Airbus A320 fleet set to triple in size by 2007.| US major airlines first quarter results | |||||
| Revenue $m | Change revenue % | Yield ¢ | Change yield % | Net income $m | |
| AA | 4,140 | -13 | 12.5 | -16 | -575 |
| America West | 460 | -22 | 10.2 | -10 | -358 |
| Continental | 1,993 | -19 | 8.8 | -10 | -166 |
| Delta | 3,103 | -19 | 12.4 | -13 | -397 |
| JetBlue | 133 | 109 | 9.9 | -4 | 13 |
| Northwest | 2,180 | -17 | 10.6 | -11 | -171 |
| Southwest | 1,257 | -12 | 7.6 | -16 | 21 |
| United | 3,288 | -26 | 9.3 | -11 | -487 |
| US Airways | 1,695 | -28 | 13.6 | -14 | -298 |
Source: Flight International
