Major Airlines See Profits Fall

High fuel prices and labor turmoil continued to send airline earnings' spiraling, with United Airlines' parent company UAL Corp. the latest to report a quarterly loss. <br><br>Delta Air Lines Inc.

Thursday, January 18th 2001, 12:00 am

By: News On 6

High fuel prices and labor turmoil continued to send airline earnings' spiraling, with United Airlines' parent company UAL Corp. the latest to report a quarterly loss.

Delta Air Lines Inc. stayed in the black for the quarter, though the Atlanta-based carrrier missed Wall Street's expectations.

Meanwhile, Northwest reported a loss for the quarter as it took charges on retiring DC10s, though its operating income rose 7 percent.

UAL Corp.

United Airlines' parent company, UAL Corp., lost $124 million in the fourth quarter as soaring fuel and labor costs extended its turmoil in a year plagued with flight cancellations and delays.

The loss reported on Thursday by the world's largest airline company was less than analysts expected but nearly double that of the previous quarter, when the carrier lost money for the first time in five years.

United shares, hovering near a six-year low, rose 62 cents to $38.50 Thursday morning on the New York Stock Exchange.

Excluding one-time items, UAL's loss came to $2.41 per share, compared with a profit of $100 million, or 59 cents per share, in the same quarter a year earlier. Analysts interviewed by First Call/Thomson Financial had estimated the airline would lose $3.84 a share.

Revenues rose 7 percent to $4.79 billion, up from $4.48 billion.

For the year, earnings were $322 million, or $2.38 per share, down a whopping 43 percent from the previous year's $778 million, or $5.87 per share.

Full-year revenues climbed 7 percent to $19.35 billion from $18.03 billion in 1999.

United has been struggling for months to win back customers who fled to other airlines when labor strife resulted in a disastrous summer of more than 20,000 cancellations and countless delays.

The Elk Grove Village, Ill.-based company began returning to normal after giving its pilots industry-leading raises in late August, but the pay hike continues to have a ripple effect on the high costs of other labor contracts at United and elsewhere.

The carrier warned that, while first-quarter bookings are higher than a year ago, it expects to post another loss in this period because of the same steep increases in jet fuel and labor costs that are dogging other airlines.

In the fourth quarter, fuel costs of $719 million were 45 percent higher than a year earlier and salaries and related costs rose 11 percent to $1.82 billion. Revenue from passengers was up a solid 7 percent to $4.11 billion, thanks in part to fare increases.

``Our solid revenue performance could not offset our higher costs, which were driven primarily by substantially higher fuel and labor costs,'' said chairman and chief executive James Goodwin. ``Further hampering the quarter's results were the reduced capacity levels we put in place to improve our operational reliability.''

The company expects to achieve a modest profit for 2001, it said.

United is counting on federal approval of its proposed merger with U.S. Airways, which would give it about a quarter of all U.S. passenger traffic and shared domination of the domestic market with American Airlines.

A final decision is expected by April 2; most experts anticipate it will be approved.

Northwest Airlines Corp.

Minneapolis-based Northwest Airlines lost $69 million, or 84 cents per share, due primarily to a pretax charge of $125 million for the anticipated retirement of a portion of its DC10 fleet.

Excluding that item, as well as a charge of $26 million related to the sale of a portion of its holdings in Continental Airlines, Northwest earned $31 million, or 34 cents a share.

In the year-ago period, Northwest earned $29 million, or 31 cents per share.

Analysts surveyed by First Call/Thomson Financial had expected fourth-quarter earnings of 31 cents a share.

Operating revenue for the fourth quarter increased 7 percent, from $2.55 billion to $2.74 billion, reflecting strong performance from both passenger and cargo operations.

``The fourth quarter was challenging,'' said Mickey Foret, Northwest executive vice president and chief financial officer. ``Our financial performance was negatively impacted by severe weather and labor disruptions, but despite that we experienced strong revenue performance and we improved earnings year-over-year.''

Passenger revenue per available seat mile increased by 2.5 percent year-over-year, while Northwest's costs per available seat mile were up just over 1 percent in the quarter, excluding the effects of a 30 percent increase in fuel costs.

For the full year, Northwest reported net income of $256 million, or $2.77 a share, including the nonrecurring charges, down nearly 15 percent from $300 million, or $3.26 a share, in 1999. Operating revenue rose 11 percent to $11.42 billion, from $10.28 billion.

``Northwest enjoyed considerable success in 2000 but we also experienced great challenges,'' said John Dasburg, president and chief executive. ``We carried more passengers, did more flying and operated more aircraft than at any point in our history.''

Among the challenges were contentious labor negotiations with its 10,000 mechanics and cleaners. The company accused members of the Aircraft Mechanics Fraternal Association of a work slowdown that resulted in flight delays and cancellations from before Thanksgiving through New Year's.

Shares of Northwest were down $1.19 to $27.75 on the Nasdaq Stock Market.

Delta Air Lines Inc.

Financially stung by poor weather, expensive fuel and unavailable pilots, Delta Air Lines earned $18 million, or 12 cents per share for the three months ended Dec. 31 , compared with $348 million, or $2.48 per share in the year-ago period.

Excluding one-time items, Delta earned $79 million, or 60 cents per share; it earned $171 million or $1.22 per share in the year-ago period.

The results for the quarter ending Dec. 31 were in line with Delta's revised forecast of 55 cents to 65 cents per share, issued earlier this month, but fell short of the 62 cents per share consensus of analysts surveyed by First Call/Thomson Financial.

Delta shares rose $1.31 to $47.69 Thursday in trading on the New York Stock Exchange.

The nation's third-biggest carrier has struggled to staff flights since November, when some of its 9,500 pilots stopped requesting overtime because of a contract dispute. That has prompted Delta to cancel thousands of flights, including nearly 4,000 last month, the company said.

Quarterly revenue rose 9 percent to $4.02 billion, up from $3.68 billion in the same period of 1999.

The airline said the pilots' job action, coupled with severe winter weather in many parts of the country, cut operating revenue by $84 million, or 40 cents per share.

In a conference call with analysts, Delta chairman Leo Mullin said he's confident the company will strike a new deal with the pilots.

``I really do think that all of this will come together in a rapid way as we come closer to the deadlines,'' Mullin said. ``I think that the progress continues to be good and constructive.''

Both sides have agreed to negotiate until the end of next month, when pilots will ask federal mediators to release them from the talks if no contract is reached. Following a federally mandated 30-day cooling-off period, pilots have said they will then be prepared to strike April 1 without a contract.

Jet fuel costs rose 35 percent in the quarter, to 72 cents per gallon.

Delta is switching its earnings reporting from a fiscal year to a calendar year. The change will begin with the first quarter of 2001.

For the 12 months ended Dec. 31, Delta earned $828 million, or $6.28 per share, on revenue of $16.7 billion, compared with $1.21 billion, or $8.15 per share, on revenue of $14.88 billion in 1999. Both years include items.

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On the Net:

http://www.united.com

http://www.delta.com

http://www.nwa.com