Welcome To Today's Episode Of "As The Airlines Turn"
As airlines post their financial results for the fourth quarter
of 2007 this week, some trends are becoming clear -- most notably,
high fuel prices may soon mark the end of any profits for those
carriers in the near future.
On Wednesday, Delta Air Lines posted a $70 million loss for
Q42007, a sizable hit to what still shaped up to be a profitable
year for the Atlanta-based carrier. Delta still managed to post a
$1.6 billion profit for all of 2007, though some of that came from
non-cash gains related to the airline's exit from Chapter 11
bankruptcy in April. The airline said it plans to distribute $158
million in profit-sharing bonuses to employees over the coming
weeks (something United may also
want to consider -- Ed.)
The fourth-quarter loss, at 18 cents per share, matched
analysts' predictions, report The Atlanta Journal-Constitution. In
his announcement to investors, Delta CEO Richard Anderson chose to
focus on the positive.
"Our successful emergence from bankruptcy; continued successful
international expansion; strong operational performance; positive
financial results -- in spite of the unrelenting pressure we face
from record fuel prices -- reflect the outstanding work of our
people," Anderson said.
As with other airlines, Delta faces mounting challenges from the
combination of climbing fuel prices, and a slowdown in the US
economy. That means fewer passengers are likely to fly in the year
ahead... and the airline will need to charge them higher fares, to
try to offset that financial hit.
The gloomy economic forecast is also the primary reason Delta is
said to be actively pursuing a merger with one of two other
carriers -- United, or (most-likely) Northwest -- though officials
have not confirmed those talks are taking place.
Meanwhile, the fourth quarter of last year brought overall
positive results for Dallas-based low-cost carrier Southwest
Airlines, which reported a rise in net income to $111 million,
equivalent to 15 cents per share. That compares favorably to Q4 of
2006, when Southwest reported a profit of $57 million.
Excluding special items, Southwest posted a year-over-year
profit increase of 12 cents per share, on revenue of $2.49 billion
-- a slight improvement over most analysts' estimates, reports The
Southwest CEO Gary Kelly didn't rest on his laurels, however,
noting both the quarter and the airline's full-year profit "fell
short of our earnings goals," due once again to the combination of
high fuel prices and a slumping economy. Kelly also noted
operational challenges posed by bad weather and security also
played a role.
Despite efforts to trim capacity, increases in the number of
seats available on Southwest flights also outpaced growth...
meaning the carrier flew emptier planes for much of the
Elsewhere throughout the industry, American Airlines posted
fourth-quarter losses, as did United. Continental said it managed a
pre-tax profit, though it hasn't yet released its full report on