Low-fare carriers may find '04 hard
By Dan Reed, USA TODAY
Three of the nation's leading discount airlines — Southwest, America West and AirTran — reported strong fourth-quarter profit Thursday, but discounters face a tougher 2004 than expected.
Costs are rising. They are competing more with one another, and their old foes, the biggest carriers, are no longer running away.
AirTran President Robert Fornaro said, "There's a land grab going on among low-fare carriers," especially in the Northeast. "Everyone wants to start a low-fare airline."
That's good news for consumers, at least in the short run.
Most discounters should stay profitable this year, but some won't make as much as Wall Street forecast months ago. Under pressure:
•Southwest (LUV). Rising wages and fuel prices are forcing costs above the airline's ideal level of 7.5 cents to fly one seat one mile, said Chief Financial Officer Gary Kelly. To pull costs back down from last quarter's 7.69 cents per seat-mile, belt-cinching measures include closing three of its nine reservation centers.
Cost pressures will ease a bit in the second half of the year as growth accelerates, Kelly said. But the pressure to keep fares low in new markets will also restrain its revenue growth. Southwest "will pull out all the stops" in Philadelphia, where it will begin flights in May, Kelly said.
Southwest earned $66 million in the fourth quarter, a 57% increase from 2002's fourth period.
•AirTran (AAI). It is "pretty pessimistic on both fuel (prices) and revenue," and its new Atlanta-Los Angeles route is losing money, CEO Joe Leonard said. Fourth-quarter net income of about $22 million almost tripled the $7.5 million earned a year earlier.
•America West (AWA). Fuel prices and rising wage and benefit costs will be a challenge this year, as will intense competition on new non-stop transcontinental routes, CEO Doug Parker said. Current prices on those routes are so low they can't be sustained, he said.
America West earned $6.8 million in the fourth quarter, compared with a net loss of $52 million a year earlier.
•Frontier (FRNT). The airline Thursday set its top fares at $299 one-way, 25% to 50% lower than before. It has said fourth-quarter profit estimates won't be met.
•JetBlue (JBLU). The carrier said in December that its fourth-quarter profit would not meet analysts' earlier expectations. "We no longer believe JetBlue is capable of earnings growth in 2004, despite a planned 37% increase in capacity," J.P. Morgan analyst Jamie Baker said in a report this month.
Contributing: Marilyn Adams, Chris Woodyard
Find this article at:
http://www.usatoday.com/travel/news/2004-0...-carriers_x.htm
By Dan Reed, USA TODAY
Three of the nation's leading discount airlines — Southwest, America West and AirTran — reported strong fourth-quarter profit Thursday, but discounters face a tougher 2004 than expected.
Costs are rising. They are competing more with one another, and their old foes, the biggest carriers, are no longer running away.
AirTran President Robert Fornaro said, "There's a land grab going on among low-fare carriers," especially in the Northeast. "Everyone wants to start a low-fare airline."
That's good news for consumers, at least in the short run.
Most discounters should stay profitable this year, but some won't make as much as Wall Street forecast months ago. Under pressure:
•Southwest (LUV). Rising wages and fuel prices are forcing costs above the airline's ideal level of 7.5 cents to fly one seat one mile, said Chief Financial Officer Gary Kelly. To pull costs back down from last quarter's 7.69 cents per seat-mile, belt-cinching measures include closing three of its nine reservation centers.
Cost pressures will ease a bit in the second half of the year as growth accelerates, Kelly said. But the pressure to keep fares low in new markets will also restrain its revenue growth. Southwest "will pull out all the stops" in Philadelphia, where it will begin flights in May, Kelly said.
Southwest earned $66 million in the fourth quarter, a 57% increase from 2002's fourth period.
•AirTran (AAI). It is "pretty pessimistic on both fuel (prices) and revenue," and its new Atlanta-Los Angeles route is losing money, CEO Joe Leonard said. Fourth-quarter net income of about $22 million almost tripled the $7.5 million earned a year earlier.
•America West (AWA). Fuel prices and rising wage and benefit costs will be a challenge this year, as will intense competition on new non-stop transcontinental routes, CEO Doug Parker said. Current prices on those routes are so low they can't be sustained, he said.
America West earned $6.8 million in the fourth quarter, compared with a net loss of $52 million a year earlier.
•Frontier (FRNT). The airline Thursday set its top fares at $299 one-way, 25% to 50% lower than before. It has said fourth-quarter profit estimates won't be met.
•JetBlue (JBLU). The carrier said in December that its fourth-quarter profit would not meet analysts' earlier expectations. "We no longer believe JetBlue is capable of earnings growth in 2004, despite a planned 37% increase in capacity," J.P. Morgan analyst Jamie Baker said in a report this month.
Contributing: Marilyn Adams, Chris Woodyard
Find this article at:
http://www.usatoday.com/travel/news/2004-0...-carriers_x.htm