Execs Pin Hopes On Low Oil Prices Hanging Around
Airline financial statements are like the old joke from the
Tonight Show with Johnny Carson: "How bad are they?" Quarterly
reports are starting to come out this week, and actually, so far...
Delta Airlines reported Thursday it lost $26 million in the
third quarter, and attributed the loss mostly to fuel prices. In
last year's third quarter, Delta earned $220 million.
AMR, the parent of American Airlines, lost $360 million...
compared to earnings of $175 million for the same period in 2007.
Continental Airlines -- which, in addition to the tough economy,
also had Hurricane Ike to contend with -- posted a $236 million
loss, compared to a Q3 2007 profit of $241 million.
But the look back at the third quarter is only half the story.
These reports are also opportunities for corporate executives to
look forward, and tell investors where they thing their companies,
and the industry, are headed.
The New York Times reports executives at Delta expressed hope
the recent steep drop in oil prices, combined with capacity
reductions, may help airlines weather an economic downturn. In a
conference call, CEO Richard Anderson told participants falling
fuel prices work like a hedge, and could result in "a couple
hundred million dollars" in fourth-quarter earnings.
"Fuel dropping like a rock is a big offset to the economy,"
American Airlines execs were less bullish... warning that fuel
prices could rise again at any time, and that recent financial
turmoil could hurt business bookings. CEO Gerard Arpey said current
oil prices, "...are not really a bargain by historic standards, and
volatility continues to be a concern. We can’t necessarily
depend on oil, one way or another."
Continental CEO Larry Kellner took a middle-of-the-road
approach, which bordered on the philosophical. "Fuel prices have
declined significantly, and if they stay around their current
levels we'll benefit greatly," he said, according to the Associated
Press. "On the other hand, we know that demand for air travel will
be adversely affected by a recession, and it remains to be seen how
deep, wide and long the recession will be."
Those personal outlooks closely parallel projected domestic
ticket sales for the fourth quarter. Delta predicts capacity cuts
will result in higher load factors than a year ago. American and
Continental both expect their planes to be less full on domestic