Losses mounting for airlines - East Valley Tribune: Business

Losses mounting for airlines

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Posted: Thursday, October 21, 2004 6:36 am | Updated: 5:47 pm, Thu Oct 6, 2011.

ATLANTA - Three of the nation’s largest airlines reported a combined $911 million in third-quarter losses on Wednesday. The largest by far was at Delta Air Lines, where bankruptcy looms unless it can quickly win concessions from its pilots and debt holders.

Soaring fuel prices were the main culprit for the red ink at AMR Corp., parent of American Airlines, Northwest Airlines Corp. and Delta, whose situation also has been exacerbated by the cost of servicing its $20.6 billion in debt. All three reported higher revenue.

Delta said its unrestricted cash reserves fell to $1.45 billion as of Sept. 30 from $2 billion on June 30. The nation’s third-largest carrier said it desperately needs $1 billion in cuts from its pilots and new debt terms from some of its creditors.

The pilots union said in a memo late Wednesday that its talks with management will continue through the weekend. The memo said that ‘‘because of the time constraints presented by Delta’s worsening financial condition,’’ the union’s executive committee will reconvene on Monday for an update. The union will not update members again ‘‘until the process concludes,’’ the memo said, suggesting talks are winding down one way or another.

Fuel prices, meanwhile, continue to hit the major carriers hard.

‘‘Fuel costs are ultimately going to affect all of the airlines in some way,’’ said Frank Werner, an industry expert who teaches finance at Fordham University in New York. But ‘‘the big carriers are still flailing along searching for the answer, and they don’t have it yet.’’

Several carriers in recent days have raised fuel surcharges on flight tickets to help offset the high fuel prices.

Known as legacy carriers, the big six airlines had a large presence in multiple regions before deregulation in 1978. US Airways before deregulation was a collection of regional carriers that merged into a legacy carrier.

The big carriers had benefited in the past by operating a hub-and-spoke system, using big cities as bases from which connecting flights to smaller markets are routed. Their market share in those areas has dwindled, however, as low-fare carriers have increasingly moved into the big carriers’ turf.

Werner said that in particular ‘‘American, Delta and United are in a very difficult position right now . . . The big carriers are going to have to decide, do they become lowcost carriers or do they come up with a new model that works for them?’’

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