Soaring fuel costs pummel airlines
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By Kyle PetersonCHICAGO (Reuters) - Record high fuel prices led three of the largest U.S. airlines to report hefty quarterly losses on Tuesday, with UAL Corp , parent of United Airlines, posting its largest loss since it completed a Chapter 11 restructuring two years ago.AirTran Holdings , parent of AirTran Airways, reversed its year-ago profit while JetBlue Airways also reported a loss, although it was smaller-than-expected and below the loss it posted in the same quarter a year earlier.The entire airline industry has been clobbered in the first quarter by soaring fuel prices, despite carriers' best efforts to control costs and stir up new revenue streams.The losses reported on Tuesday, which follow those reported last week by AMR Corp and Continental Airlines , put additional pressure on carriers to merge as a way to cut costs and boost revenue.Last week, Delta Air Lines and Northwest Airlines proposed a merger that would create the world's largest airline.UAL's loss was the largest reported by a major carrier for the quarter. But the airline said it plans to ramp up cost-cutting for 2008, trim domestic capacity and pull 30 aircraft from its fleet."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.UAL shares fell 9 percent to what would be new 52-week closing low of $19.50 in Nasdaq trading on Tuesday.Airline shares were broadly weaker on Tuesday with the Amex airline index <.XAL> down more than 8 percent at its lowest level on record after Nymex crude oil futures hit a new record high of $118.47 a barrel.STEEP LOSSUAL said it lost $537 million, or $4.45 per share in the first quarter, more the triple the loss of $152 million, or $1.32 per share, a year earlier.Wall Street analysts had expected the parent of the No. 2 U.S. airline to lose $3.41 per share, according to Reuters Estimates.UAL, which completed a massive bankruptcy restructuring in 2006, blamed the results on its consolidated fuel bill, which rose $618 million in the quarter. The company reported operating revenue of $4.71 billion, up from $4.37 billion a year earlier.UAL said it is targeting $200 million in nonfuel cost savings in addition to the $200 million announced earlier in the year. The cost cuts will require a reduction in UAL's salaried and management work force by 500 employees and its unionized work force by about 600 by the end of 2008.The 1,100 job cuts represent about 2 percent of the company's work force of more than 55,000, according to the UAL Web site. UAL said it would pull 30 aircraft from its operating fleet, 10 to 15 more planes that initially announced in March.UAL also is reducing capital expenditures by about $200 million from $650 million as previously planned and cutting domestic capacity by about 9 percent by the fourth quarter."In this extraordinarily difficult environment, we recognize the pace of change needs to accelerate, and our actions today reflect just that," UAL Chief Executive Glenn Tilton said in a recorded message to employees.Other major airlines are implementing significant cost cuts. Delta, for example, said in March it would cut 2,000 jobs and scale back operations.In addition to these steps, airlines -- including United -- are aiming to boost revenue by charging higher fares, and adding new fees for items and services that used to be included in the price of a ticket. Most notably, some carriers have started to charge passengers to check a second bag. JetBlue announced its new fee to check a second bag on Tuesday.UAL ended the quarter with an unrestricted cash and short-term investment balance of $2.9 billion.Earlier on Tuesday, low-cost carrier AirTran 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 carrier recorded fuel costs of $268 million, up from $102 million a year earlier.JetBlue, meanwhile, posted 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.AirTran shares were down 11 percent at $4.06 on the New York Stock Exchange. JetBlue shares were down 2 percent at $4.83 on Nasdaq.(Reporting by Kyle Peterson, John Crawley, Aarthi Sivaraman)
(c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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