Fuel Prices And Economy Killed Any Hope For Profits, Carriers Say

As if there were any doubt of how much high fuel prices and a terrible economy hit airlines last year, consider the following: Continental Airlines announced Thursday it lost $585 million in 2008, including $234 million attributed to special items such as fuel hedges.

That figure was eclipsed, however, by the $803 million net loss reported by US Airways.

Weakening economic conditions and highly volatile fuel prices presented financial challenges for both airlines in the fourth quarter. Continental recorded a fourth quarter net loss of $266 million, including special items; US Airways recorded fourth quarter net losses of $541 million, largely due to fuel hedges that became staggering liabilities as oil prices dropped below $40 per barrel.

CEOs for both airlines attempted to put a positive spin on the numbers, noting many expect 2009 to be a better year all around.

"I want to thank my co-workers for working together to meet tough operational and financial challenges during the year," said Continental's Larry Kellner. "While there are continuing hard times ahead, thanks to our team, we are well-positioned to maintain our place as an industry leader."

Kellner backed up that assertion by noting consolidated (i.e, both mainline and regional) yield for the fourth quarter increased 5.7 percent year-over-year, while  revenue per available seat mile (RASM) for the fourth quarter increased 4.8 percent year-over-year.

Over at US Airways, CEO Doug Parker noted similar improvements in that carrier's yield and RASM... and stressed the abysmal Q4 and annual performances were hardly unique to US Airways.

"Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008," he said. "In fact, had our 2008 fuel price including realized gains and losses on fuel hedging instruments remained at 2007 levels, the Company’s fuel expense would have been approximately $1.4 billion lower.

"The impact of high oil prices acted as a catalyst for airlines to take unprecedented measures to bring the supply of seats back into balance with passenger demand. We believe these actions have significantly softened the blow from the economic downturn that we as an industry now face."

Parker added US Airways has made "tremendous progress" on the operational front, noting the carrier has made impressive strides towards improving on-time performance.

"As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment," he said. "We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead."

FMI: www.usairways.com, www.continental.com