American, Delta post $2.5 billion in losses
The losses still are less than what was expected and the airlines' shares are up.
Two of the nation's largest airlines, American Airlines and Delta Air Lines, posted nearly $2.5 billion in losses in the second quarter as high fuel costs continued to batter the air travel industry.
But the results were not as bad as analysts were expecting, and shares of the two carriers surged in early trading. Shares of American's parent AMR Corp. were up more than 20% to $5.30 while Delta shares rose 22% to $5.74.
American, the nation's largest carrier and the busiest airline at Los Angeles International Airport, said it lost $1.45 billion in the quarter as it took a $1.1-billion charge against earnings to reflect the declining value of older aircraft it is taking out of service.
Excluding the one-time charge, the airline posted a loss of $284 million, or $1.13 per share, as fuel costs jumped $838 million. The carrier reported a profit of $317 million in the same period last year. Analysts were expecting the Fort Worth, Texas-based airline to post a loss of about $1.40 a share in the latest quarter.
In a memo to employees, AMR Chief Executive Gerard Arpey said that "revenue performance during the second quarter was actually reasonably good," but the revenue gains "didn't come close to matching the extraordinary rise in the price of fuel."
Revenues rose 5.1% to $6.18 billion.
Arpey said the airline paid an average of $3.19 per gallon of jet fuel in the quarter, up 53% from $2.09 per gallon a year ago. He added that the airline was currently paying more than $4 a gallon.
"Our company continues to be severely challenged by the fuel crisis that has afflicted our entire industry, and we expect these difficulties to continue for the foreseeable future," Arpey said in a separate statement.
To cope with the high fuel costs, the airline said it would make further cuts in service next year as it grounds older, gas-guzzling airplanes earlier than planned. And "given the current environment," the airline said it has "decided to place on hold" the sale of its American Eagle regional carrier.
Delta, the third largest airline in the U.S. and the fourth busiest at LAX, reported a loss of $1.04 billion in the quarter after it took a $1.2 billion charge to write-down the declining value of its so-called intangible goodwill, or the value of the company's brand and reputation.
Without the charge, Delta said it would have posted a profit of $137 million, or 35 cents a share, down from $274 million a year ago. Analysts were expecting a modest profit of about 10 cents a share.
Revenues rose 10% to $5.5 billion as the airline focused more on the lucrative international travel market. At the same time, the airline cut costs and hedged a higher percentage of its fuel that allowed it to offset about 80% of the fuel expenses, which rose by about $1 billion, the airline said.
Delta, based in Atlanta, said it expects its merger with Northwest Airlines will close by the end of the year and will lead to $2 billion in annual savings by 2012. The merger with the Eagan, Minn.-based Northwest would create the world's largest airline.
peter.pae@latimes.com
