American and Delta airlines lose $2.5bn in quarter on oil price rise
Thursday 17 July 2008
Two of the largest airlines in the US lost a combined $2.5bn (£1.25bn) in the second quarter, as rising jet fuel prices and restructuring costs hobbled their operations.
American Airlines and Delta said they would ground additional planes and cut even more flights in their attempt to reduce costs and limit capacity. By doing so, they hope to be able to push through further ticket price increases – but both warned that the industry business model needs to change dramatically and quickly.
Gerard Arpey, chief executive of AMR, the parent company of American Airlines, said: "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." AMR lost $1.45bn in three months; Delta said it had lunged $1.04bn into the red. Delta's chief financial officer, Edward Bastian, said: "Unprecedented fuel prices have created a real crisis in the airline industry, and Delta has been a leader in responding with quick, decisive action."
The latest financial figures cover the start of the peak summer travel season. Ray Neidl, an airline analyst at Calyon Securities: "The second quarter is supposed to be the best quarter for the industry, so these results have to be disappointing."
Delta emerged from bankruptcy protection last year, the last of a string of bankruptcies that have plagued the US airline industry. It is lobbying to be allowed to merge with Northwest Airlines, with which it agreed a deal this year.
Analysts have long argued that the industry needs to continue to cut flights if it is to manage sustainable profitability, but the deteriorating economy and stubbornly high fuel price has complicated the picture.
AMR said it would trim domestic capacity by up to 12 per cent in the fourth quarter and headcount by 8 per cent. Delta has said it plans to cut domestic capacity by 13 per cent in the second half of the year and to eliminate 2,000 jobs.
Shares in both companies soared yesterday after a second day of sharp falls in the crude oil price, on which jet fuel prices are based.
Sales of the tablet are set to fall again, say analysts
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Parties threaten resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake report claiming the street artist's identity has been revealed
- 3 Are you ready for Crazy Doritos, the red-hot snack food craze sweeping Mexico’s streets?
- 4 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 5 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Isis in Kobani: US resupplies Kurdish fighters by plane - then Turkey allows reinforcements through its border
Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
Banksy arrest hoax: Internet duped by fake report claiming the street artist's identity has been revealed
Super-sized ships arrive in Britain: How big can they get?
Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...