Higher Jet-Fuel Costs Shave Airlines’ Earnings
UAL Corp.’s United Airlines and US Airways Group Inc., the two largest U.S. carriers operating in bankruptcy, posted third-quarter losses Thursday while profit at JetBlue Airways Corp. fell, all on higher jet-fuel costs.
United’s loss narrowed to $274 million, or $2.38 a share. US Airways’ loss widened to $232 million, or $4.22. JetBlue’s profit fell 71% to $8.42 million, or 8 cents a share, making it one of the few carriers that is still profitable.
“It doesn’t matter which airline you are and how profitable you have been, jet fuel is going to take all the wind out of your sails and all the money out of your bank,” said Michael Miller, a partner at Velocity Group, a consulting firm in Washington.
Spot prices for jet fuel, the carriers’ second-biggest cost after labor, rose 60% in the quarter. Major airlines have been unable to raise fares because of competition from carriers such as Southwest Airlines Co. that have lower labor costs. Fuel costs rose 79% at JetBlue, 57% at United and 34% for US Airways, the companies said.
“The one bright spot is that JetBlue managed to make a profit,” Miller said. “If JetBlue is able to make money, that’s where other airlines should be looking in terms of a cost structure.”
Carriers such as US Airways and JetBlue canceled flights as four hurricanes hit the Southeast in August and September. JetBlue scrapped 464 flights and lost business during the storms, and US Airways said the storms cost at least $20 million.
United’s sales rose to $4.3 billion from $4 billion, US Airways’ climbed to $1.8 billion from $1.77 billion and JetBlue’s increased to $323.2 million from $273.6 million.
United’s loss narrowed from $367 million, or $3.47 a share, a year earlier, US Airways’ widened from $90 million, or $1.69, and JetBlue declined from $29 million, or 26 cents, a year earlier. Forest Hills, N.Y.-based JetBlue was expected to earn 10 cents a share, the average estimate of analysts surveyed by Thomson First Call.
“It’s clear from this report that even JetBlue isn’t immune from the revenue pressures that are affecting the other carriers,” said Fitch Ratings analyst Bill Warlick. Discount carriers are bumping into each other, with JetBlue butting up against AirTran Holdings Inc., US Airways and America West Holdings Corp., he said.
Chicago-based United, the world’s second-largest airline, is seeking to reduce costs to win financing that would help UAL exit a Chapter 11 bankruptcy proceeding that began in December 2002.
Arlington, Va.-based US Airways, the seventh-largest U.S. carrier, filed for protection from creditors Sept. 12 after failing to reach agreements with its unions to cut costs. US Airways emerged from Chapter 11 bankruptcy protection in March 2003.
Shares of United fell 3 cents to $1.03 and US Airways fell 5 cents to 96 cents, both in over-the-counter trading. JetBlue shares rose 41 cents to $22.85 on Nasdaq.
