"Major U.S. airlines see $10 billion loss in 2008"

Wednesday, June 18, 2008

Major U.S. airlines see $10 billion loss in 2008 
By John Crawley
Reuters 


WASHINGTON - U.S. airlines projected Tuesday they could lose $10 billion in
2008 due to skyrocketing fuel costs, a sum that would almost match the
industry's worst-ever year loss in 2002.

James May of the Air Transport Association also told a joint Senate hearing
on speculative trading in the oil markets that up to 200 communities could
lose airline service as a result of carrier capacity cuts that are being
imposed to save money.

"This nation's economy is inextricably linked to the viability of its air
transportation system. If the airlines continue to spiral downward, so will
the economy," May said.

Wall Street analysts also are predicting multibillion-dollar losses for big
airlines that are spending 50% more on fuel this year. Total fuel costs are
expected to top $61 billion, the largest expense for airlines.

Shares of U.S. airlines moved broadly higher Tuesday as global crude prices
slipped from record highs. However, shares of United Airlines, a unit of
UAL, were off 2.6% to $7 after the company projected its 2008 fuel bill
would hit $9.5 billion.

United's disclosure was made as part of May's push in Congress for tougher
regulation of oil futures trading. Airlines believe market manipulation and
speculation are behind the record run-up in global crude prices although the
Bush administration believes recent price spikes are due mainly to supply
and demand.

May said quick legislative and regulatory action is needed to maintain a
viable airline industry.

"We are asking for Congress to take steps now to totally close the loopholes
and make the market more transparent and balanced, to ensure a level playing
field for all," May said.

Lawmakers also have pushed for tighter oversight. U.S. oil futures
regulators said Tuesday they are moving to impose more limits on overseas
trading.

Some Wall Street analysts believe the current airline downturn could be
worse than the one that triggered bankruptcies at four major carriers
between 2002-07.

Carriers are scrambling to slash capacity and find new revenue through fees
for checked luggage and other extras that used to be rolled into the cost of
a ticket.

Higher industry fuel costs are a major industry wide problem. But revenues
also are beginning to raise concern with pressure on airlines to boost them
significantly to offset higher costs.

Lehman Brothers analyst Gary Chase believes "cracks are forming" in the
airline industry revenue picture but remains cautious about the overall
outlook and does not believe there has been a "sudden weakening" of revenue
across-the-board that is "typical of airline downturns."

Amex airline index was up almost 1.39%.

Some carriers, including US Airways and low-cost carrier AirTran, have
reported weaker than expected second quarter revenue guidance while others,
like JetBlue Airways and Continental Airlines, are doing better.

AirTran shares fell 5% on Tuesday to $2.53.

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