Soaring fuel prices led three of the largest U.S. airlines to report substantial quarterly losses on Tuesday, with UAL Corp, parent of United Airlines, posting its largest loss since in two years and will shrink its domestic business this year, in line with plans at other airlines.
UAL said its quarterly loss increased to $537 million, or $4.45 a share, from $152 million, or $1.32 a share, a year earlier. Operating revenue rose 7.7 percent to $4.71 billion from $4.37 billion.
The pressure of high energy prices and a weakening economy are a wake-up call that the pace of change must accelerate, said Glenn Tilton, United's chairman and chief executive.
Fuel at $110 a barrel does not alone make the case for consolidation, he said. It only makes it more compelling, as does increased foreign competition and a softening economy.''
The airline citied record fuel prices as a factor for its sharp decline and reported the cost of fuel in the quarter rose $534 million, or 51.3 percent to $1.58 billion.
We consider the first quarter to be disappointing, though are impressed that the company is taking more aggressive steps than others in response to crushing fuel costs, said Jamie Baker, analyst at JP Morgan, in a research note.
Meanwhile, AirTran Holdings, parent of AirTran Airways, said it lost $34.8 million, of 38 cents per share, in the first quarter, reversing a year-ago profit of $2.2 million, or 2 cents per share. The low-cost carrier AirTran also said it will cut planned capacity expansion beginning in the final four months of 2008.
JetBlue Airways also reversed its year-ago with a narrower-than-expected net loss of $8 million, or 4 cents per share, compared with a loss of $22 million, or 12 cents per share, a year earlier.
JetBlue is not immune to the unprecedented rise in fuel prices, and we are taking steps to respond to this environment, said Chief Executive Dave Barger in a statement.
AirTran shares were down 18.8 percent at $3.70 ahead of the closing bell, and JetBlue shares were down 6.3 percent at $4.62.
The entire airline industry has been hard hit in the first quarter by soaring fuel prices, despite carriers' best efforts to control costs.
Dismal reports were posted last week by fellow carriers AMR Corp and Continental Airlines, which is putting additional pressure on carriers to merge as a way to cut costs and increase revenue.