Airline Earnings Reflect 2005 Improvements

Continental Airlines and American Airlines during earnings announcements made yesterday and today, respectively, said high fuel prices and low-cost competitors continued to plague efforts to turn a profit for the fourth quarter or the full year of 2005.

Meanwhile, Southwest Airlines—the ringleader of the low-cost competitors to which the legacy carriers often partially attribute their woes—today boasted an $86 million fourth-quarter income and full-year net earnings of $548 million.

As the airline industry heads into what in what analysts anticipate to be a better 2006, Continental and American in many areas made improvements over 2004 amid an average 2005 jet fuel price of more than $72 per barrel.

Incurring a $68 million net loss, Continental noted that mainline fuel costs "were $856 million higher than in 2004." Continental, however, made gains in operational performance during the quarter, with load factor increasing slightly, capacity increasing 9 percent and per-seat-mile revenue jumping 7.6 percent year over year.

American's parent company AMR for the full year posted a $93 million operating loss $861 million net loss, "as compared to 2004's full-year operating loss of $144 million and net loss of $761 million."

With fuel adding about $1.7 billion to its cost structure for the full year, AMR chairman and CEO Gerard Arpey during the company's earnings call today said the company managed to turn an operating profit. "Our fourth-quarter results close the book on another very difficult year," Arpey said in a statement. "But while we are dissatisfied with our financial results, we did make progress in a number of important areas during the year, including our first annual operating profit, excluding special items, since the year 2000."

During the fourth quarter, American's revenue per available seat mile increased 13.8 percent year over year, while load factors jumped 3.6 points over the same period in 2004 to 77.9 percent. Meanwhile, the company said, "Yield, representing average fares, was up 8.5 percent."

Although Southwest Airlines headed out of 2005 in the black, for the fourth quarter the carrier's load factors and yields hovered below its legacy competitors. "As a result of strong customer demand, we achieved a record fourth-quarter load factor of 69.6 percent at improved yields, which were up 4.2 percent. Unit revenues grew 11.7 percent with only modest fare increases," Southwest said in an earnings statement.