High jet fuel prices added about $100 million in unplanned expenses and may prevent America West Airlines from being profitable in the second quarter and the rest of the year, CEO Doug Parker said Wednesday.
Parker told a transportation conference in New York that profitability "is too close to call." It was a departure from projections the company gave in April when it posted a small profit for the fourth quarter in a row, and Parker said at the time he expected the Tempebased carrier to be in the black for second quarter and all of 2004.
Some airlines struggling with high fuel prices have tried to raise ticket prices to offset rising costs, but most fuel surcharges have failed. Others have been so desperate they have slowed flights. America West removed inflight magazines to cut fuel consumption.
Jet fuel is the industry’s second-highest operating expense after labor. Michael Boyd, a Colorado-based airline consultant, called Parker’s remarks good news.
"If it’s too close to call, that means they’re on the edge," he said. "A lot of carriers, United, American, they’re saying ‘We’re not going to be able to make a profit because of the fuel.’ America West is in a much better position right now than a lot of the airlines out there. You can’t do much to control this. Taking three copies of Travel and Leisure and other magazines nobody reads off the airplane doesn’t change the fuel much."
America West spokeswoman Elise Eberwein said there are no plans to raise fares or surcharges to make up the loss. "There’s so much capacity out there and it’s so cutthroat, meaning if we try to put a $5 fuel surcharge in, no one else is going to match it, and the customer has enough choice they’re going to go ‘I’ve got 10 other choices to get there.’ So it’s a huge excess capacity issue."
Parker predicted the industry will shrink in the next nine months to a year.
The fuel costs may hinder the company’s plan to grow the airline at 8 percent a year. "That is still the number we’re using," Eberwein said. "At some point, we’ll have to look at that, I think."