Airline Losses Set to Bring Industry’s Worst 2nd Quarter

Two of the nation’s largest airlines posted a combined $279 million in quarterly losses Thursday, as sluggish air traffic led the industry toward what is expected to be its worst second quarter in history.

Low-cost carrier Southwest Airlines Co., the only major U.S. airline to report a profit each quarter since the Sept. 11 attacks, once again proved to be the sector’s anomaly as it posted a $102-million profit, or 13 cents a share.

Losses recorded by other major U.S. airlines narrowed in the second quarter, one period after the eight largest carriers racked up deficits of more than $2.4 billion.

But analysts still expect as much as $1.4 billion in red ink from the industry this earnings period, and the money-losing airlines that issued outlooks Thursday revealed no clear picture of when they might return to profitability.

“I think we’re seeing confirmation that the revenue recovery, which was going along at a nice clip in the fourth quarter and the first quarter, has ground to a halt, and at the moment there’s no light at the end of the tunnel,” said Salomon Smith Barney analyst Brian Harris.

Based on the losses reported this week, U.S. air carriers could easily double the $890 million in losses they reported a year ago, said David Swierenga, chief economist for the Air Transport Assn., an industry trade group.

Second quarters are usually airlines’ strongest, as summer leisure travel swings into play.

The nation’s airline industry has reported an operating loss in the second quarter only three times in the last three decades, Swierenga said.

Delta Air Lines Inc., the third-biggest U.S. carrier, said Thursday that its second-quarter loss more than doubled to $186 million, or $1.54 a share. Delta posted the industry’s second-largest quarterly deficit this earnings season, following AMR Corp. unit American Airlines’ loss of nearly half a billion dollars reported Wednesday.

Atlanta-based Delta’s revenue dropped 8% to $3.47 billion, but that decline was shadowed by an 11.4% drop in operating revenue at Northwest Airlines Corp. and a 20% plunge in revenue at American.

Southwest, the No. 7 U.S. air carrier, said its operating revenue slid 5% as travel demand stayed weak in the long wake of Sept. 11. Dallas-based Southwest expected to post yet another profit in the third quarter, but said its income should slide from the second quarter.

Analysts said Southwest had to discount its ticket prices deeply to attract travelers, but continued to expand its route structure and gain market share.

Delta executives said the already-tepid recovery in air traffic and ticket prices turned flat in the second quarter.

“After seeing traffic improvement during each month in the first quarter, the pace of recovery slowed in the June quarter,” Delta President and Chief Operating Officer Frederick Reid said.

Minneapolis-based Northwest, which recorded a wider quarterly loss of $93 million, or $1.08 a share, said it was confident it would be one of the airlines leading the faltering industry back to profitability.

Northwest said its operating unit cost--or expense required to move one seat one mile--was down 2.2% from a year ago; Delta said it has cut about $2 billion in costs from a business plan it had set in early 2001.

On the New York Stock Exchange, Delta shares closed up 10 cents, at $16.55, and Southwest fell 65 cents to $13.28.

Northwest rose 42 cents to $9.88 on Nasdaq.