Southwest Ekes Out Modest Profit
Three more airlines posted third-quarter losses, totaling $114 million, while low-fare leader Southwest Airlines Co. again eked out a modest profit amid a grim travel slump. But even Southwest said Thursday that it might suffer its first loss in a decade during the current quarter.
Delta Air Lines Inc. further underlined the industry’s gloomy state by saying it would shed as many as 8,000 more jobs, or about 10% of its work force, as the carrier scrambles to slash costs in the face of weak revenue. Delta, with 76,000 employees as of Sept. 30, this week posted a third-quarter loss of $326 million and had planned to eliminate 1,500 flight attendant jobs.
Northwest Airlines Corp. reported a third-quarter loss of $46 million, or 55 cents a share; Continental Airlines Inc. lost $37 million, or 58 cents; and America West Holdings Corp. said it lost $31 million, or 92 cents.
Southwest -- the largest airline in California and the only major carrier to stay in the black since the Sept. 11 attacks -- said third-quarter profit was $74.9 million, or 9 cents a share, down 50% from $151 million, or 19 cents, a year earlier. But the latest quarter included $48 million that was the last installment of Southwest’s share of the $5 billion given to the industry by a post-Sept. 11 federal bailout.
Southwest shares rose $1.18 to close at $14.48 on the New York Stock Exchange.
The airlines warned that conditions show no sign of improving, and Dallas-based Southwest said it couldn’t predict whether it would turn a profit in the three months ending Dec. 31. The last time Southwest lost money was in the first quarter of 1991, during the Persian Gulf War.
Southwest and the other carriers also said a U.S. war with Iraq would be another devastating blow to travel and their financial health. “It’s going to be catastrophic for us” unless the U.S. government immediately arranged more aid for the carriers, said Continental Chairman Gordon Bethune.
Yet, lackluster travel demand is preventing the airlines from hiking fares to narrow their losses. “The world is on sale today for the holiday period” surrounding this Thanksgiving and Christmas, said Tim Griffin, Northwest’s executive vice president for marketing.
So the carriers are relying on cost cuts.
Delta plans to eliminate 7,000 to 8,000 jobs -- including management positions -- and said it hopes that most will occur with voluntary retirement programs. But if they are not enough, “involuntary furloughs will be necessary,” Delta Chairman Leo Mullin said.
Southwest said it is still planning to grow in spite of the weak market. The airline, which mostly flies trips of under 1,000 miles, is starting another transcontinental flight between San Jose and Baltimore on Jan. 12. Southwest added the flight after seeing its new Los Angeles-Baltimore service get off “to a tremendous start,” Gary Kelly, Southwest’s chief financial officer, said in a call with analysts.