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Airline Share Prices Descend as Revenue Worries Grow

MARKET SAVVY | SAVVY CONFIDENTIAL: A Briefing for Investors

May 20, 1999|Reuters

Airline stocks opened weaker Wednesday and continued falling on what Wall Street analysts say are rising concerns about revenue trends.

Industry figures released late Tuesday from the Air Transport Assn. show that domestic unit revenue, which measure revenue per seat, fell 3% in April, steeper than the 1% to 1.5% drop expected by some analysts.

"April revenue figures . . . were very discouraging," said PaineWebber analyst Samuel Buttrick. "Combined with weak initial traffic data for May, it strongly suggests that second-quarter estimates need to come down."

UAL shares took the biggest hit, falling 7.3%, or $5.88, to close at $74.69 on the New York Stock Exchange. Continental Airlines' stock lost $3.06, or nearly 7%, to close at $42.50, also on the Big Board.

Delta Air Lines and US Airways each lost 5%. Delta closed down $3.19, at $61.50, and US Airways fell $2.75 to close at $52.13, both on the NYSE. Northwest Airlines fell 88 cents, to $33.50, on Nasdaq.

Buttrick said he cut his earnings estimates on second quarter earnings for American parent AMR Corp. to $1.70 per share from $1.85 and cut second-quarter estimates on America West Holdings Corp. to 80 cents from 85 cents.

AMR shares fell 3%, or $2.13, to close at $69.19 on the NYSE. But one airline stock that managed to gain ground was America West, which rose 25 cents to close at $20.63 on the NYSE.

BT Alex. Brown analyst Susan Donofrio said deteriorating domestic revenue trends could weaken further because of a growing problem with over-capacity in the second half. She said fuel prices, which have been rebounding, will also make year-over-year cost comparisons more difficult.

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