10 major US-based airlines post $1-billion combined operating deficit

In all, 10 of the biggest United States-based airlines suffered combined operating deficit amounting to $1 billion in the first half of 2008 because of exorbitant prices of aviation turbine fuel and a slowing down of economy.

Of these 10, AMR Corporation, headquartered in Fort Worth, Texas, the United States, and which owns American Airlines, and UAL Corporation, with corporate offices in Chicago and the owner of United Air Lines, may report the biggest losses in the third-quarter of 2008, according to aviation analysts.

The US media quoted an analyst at Standard & Poor’s Equity Services as saying: “Moves by airlines to shed flights, planes and workers following a surge in jet fuel prices in the first half of 2008 may help them weather a slump in travel demand. Fuel really hit the airlines hard, and they responded quickly by raising fares and taking capacity out. They have made a lot of hard decisions.”

Jet fuel cost an average of $3.53 a gallon in the last quarter, which was 61% higher than the cost a year earlier.

Estimates by analysts compiled by the website bloomberg.com show that American Airlines, United Air Lines and Continental Airlines (based in Houston, Texas, the United States), each registered traffic declines of about 9% for September 2008 – the worst results for any month in 2008.

While the AMR Corporation lost $414.3 million in its fourth successive quarterly deficit, the UAL Corporation is anticipating a loss of $302.3 million.

Ed Bastian, president of Delta Air Lines, based and headquartered in Atlanta, Georgia, the United States, had said in September 2008 that the company would “roughly break even for the quarter because of higher fares and capacity cutbacks plus more revenue from cargo and maintenance operations.”

Delta Air Lines is set to become world’s largest airline when it buys Northwest Airlines, the principal subsidiary of Northwest Airlines Corporation, headquartered in Eagan, Minnesota, the United State, later in 2008.

In September 2008, the International Air Transport Association (IATA), the international industry trade group of airlines, headquartered in Montreal, Quebec, Canada, had more than doubled its forecast for combined losses that would be suffered by the world’s biggest carriers in 2008 to $5.2 billion. And, it was the fifth time that IATA, the organisation that represents, leads and serves the airline industry in general, had jacked up its annual loss estimate.

Meanwhile, surveys have showed that United States-based airlines are trying to cover fuel costs through increasing fares and charging new fees such as $30 round-trip to check the first piece of luggage. In their struggle to survive, these airlines are also grounding 460 planes, cutting about 26,000 jobs as well as reducing domestic capacity by at least 10%. (For many airlines, fuel accounts for the highest cost, exceeding labour charges.)

Simultaneously, the major airlines in the United States are planning to add to their cash kitty: UAL Corporation plans to add about $275 million to its cash holding by the end of 2008 through aircraft financing and selling assets. AMR Corporation is taking measures to increase its cash holding, including sale of stocks that fetched about $300 million.