AMR is discussed at the end of this article. I guess Kudlow & Cramer (NBC financial analysts) were correct on Friday night when they argued the employees at AA haven't given enough! Or maybe, just maybe, as the guest airline analyst on the same show stated, "Arpey and his gang have NO plan." Again, the union-heavy Southwest makes a tidy profit (surprise, surprise), so how can it be that unions are destroying the airlines (as Kudlow & Cramer readily pointed out on the same broadcast)? I see a hole in their argument but I can't seem to put my finger on it. Read on...
Airlines May See Operating Profit
Sun October 12, 2003 08:05 AM ET
By Meredith Grossman Dubner
CHICAGO (Reuters) - The U.S. airline industry is expected to post its first quarterly operating profit in nearly three years on the heels of an uptick in travel demand during the summer, but analysts say a host of challenges still loom.
One analyst expects the largest U.S. carriers to post third-quarter operating profits totaling $300 million, compared to a $1.5 billion operating loss a year earlier. Cost cutting and capacity reductions, combined with improved demand now that the SARS virus and Iraq war have ended, helped boost results.
The industry is still forecast to post a pretax loss of $460 million compared with a pretax loss of $2.2 billion the year before, according to Merrill Lynch analyst Michael Linenberg.
Delta Air Lines kicks off the reporting season on Tuesday for the third quarter, typically the industry's strongest quarter.
Yet even as carriers begin to trim operating losses, the challenges are still stacked high, analysts said.
Major network airlines face rapid expansion by their low-cost rivals, which account for more than 20 percent of domestic traffic. Many carriers are strapped with huge costs and large debt loads. And while demand crept back slightly during the summer, it still remains at low levels.
"The largest cost challenges clearly lie with the network airlines as they need major cost reductions for their very survival, but the low-fare carriers have to continue delivering a low cost product as well," Lehman Brothers analyst Gary Chase wrote in a research note.
Linenberg noted that every carrier has plans for cost cuts -- either through labor concessions, aircraft retirements and deferrals, or hub closures and flight reductions.
Still, airline shares have soared as investors breathe a sigh of relief that the Iraq war and SARS outbreak are over.
The American Stock Exchange airline index .XAL> rose 11 percent in the third quarter and 37 percent in the first nine months of 2003.
"Airline stocks have extended their gains in 2003 because liquidity concerns instilled greater caution with regard to supply, and stronger business and consumer demand has lifted revenues above pre-Iraq/SARS levels," Goldman Sachs analyst Glenn Engel wrote in a note.
Unit revenue, a key gauge of industry performance, was up for the fifth straight month in September.
But some analysts worry that the early signs of recovery could prompt carriers to attempt to grow too fast, which could hinder their recovery.
AMR Corp.'s American Airlines, the world's largest carrier that narrowly averted bankruptcy in the second quarter, is expected to post a third-quarter loss of 64 cents a share, according to Reuters Research, a unit of Reuters Group Plc.
Low-cost carrier Southwest Airlines, the No. 6 U.S. airline, is forecast to post a profit of 12 cents a share.
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NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq and all other quotes delayed by at least 15 minutes.
Airlines May See Operating Profit
Sun October 12, 2003 08:05 AM ET
By Meredith Grossman Dubner
CHICAGO (Reuters) - The U.S. airline industry is expected to post its first quarterly operating profit in nearly three years on the heels of an uptick in travel demand during the summer, but analysts say a host of challenges still loom.
One analyst expects the largest U.S. carriers to post third-quarter operating profits totaling $300 million, compared to a $1.5 billion operating loss a year earlier. Cost cutting and capacity reductions, combined with improved demand now that the SARS virus and Iraq war have ended, helped boost results.
The industry is still forecast to post a pretax loss of $460 million compared with a pretax loss of $2.2 billion the year before, according to Merrill Lynch analyst Michael Linenberg.
Delta Air Lines kicks off the reporting season on Tuesday for the third quarter, typically the industry's strongest quarter.
Yet even as carriers begin to trim operating losses, the challenges are still stacked high, analysts said.
Major network airlines face rapid expansion by their low-cost rivals, which account for more than 20 percent of domestic traffic. Many carriers are strapped with huge costs and large debt loads. And while demand crept back slightly during the summer, it still remains at low levels.
"The largest cost challenges clearly lie with the network airlines as they need major cost reductions for their very survival, but the low-fare carriers have to continue delivering a low cost product as well," Lehman Brothers analyst Gary Chase wrote in a research note.
Linenberg noted that every carrier has plans for cost cuts -- either through labor concessions, aircraft retirements and deferrals, or hub closures and flight reductions.
Still, airline shares have soared as investors breathe a sigh of relief that the Iraq war and SARS outbreak are over.
The American Stock Exchange airline index .XAL> rose 11 percent in the third quarter and 37 percent in the first nine months of 2003.
"Airline stocks have extended their gains in 2003 because liquidity concerns instilled greater caution with regard to supply, and stronger business and consumer demand has lifted revenues above pre-Iraq/SARS levels," Goldman Sachs analyst Glenn Engel wrote in a note.
Unit revenue, a key gauge of industry performance, was up for the fifth straight month in September.
But some analysts worry that the early signs of recovery could prompt carriers to attempt to grow too fast, which could hinder their recovery.
AMR Corp.'s American Airlines, the world's largest carrier that narrowly averted bankruptcy in the second quarter, is expected to post a third-quarter loss of 64 cents a share, according to Reuters Research, a unit of Reuters Group Plc.
Low-cost carrier Southwest Airlines, the No. 6 U.S. airline, is forecast to post a profit of 12 cents a share.
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NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq and all other quotes delayed by at least 15 minutes.
