Delta, AMR combine for $2.5b loss

Gerard Arpey, chief of American Airlines parent AMR, said high fares will cause some people to stop flying. AMR reported a quarterly loss of $1.45 billion. (Justin Sullivan/Getty Images)

ATLANTA - The red ink is mounting for airlines amid soaring fuel costs, leaving them little choice but to raise ticket prices further. As Delta Air Lines and American Airlines reported big second-quarter losses yesterday, they signaled customers should expect more hits to their checkbooks.

There are signs overall demand for flying within the United States is softening, but industry observers insisted that will not stop rising fares, more fees, and fewer domestic flights.

That point was underscored as Atlanta-based Delta Air Lines Inc. reported a $1.04 billion loss in the April-June quarter and Fort Worth-based AMR Corp., the parent of American, posted a $1.45 billion loss for the quarter. One-time charges and unprecedented fuel costs affected both airlines, which saw their shares soar as their results beat Wall Street expectations and oil prices dropped.

"Clearly, with fuel at these record levels, there's no question . . . airfares need to go up," Delta president Ed Bastian said.

AMR chief Gerard Arpey said high fares will cause some people to stop flying. "We don't believe we're at that point yet, so we continue to believe the industry can sustain - we can sustain - higher prices, so we're raising our prices."

Delta's loss for the three months ending June 30 amounted to $2.64 a share, compared to a profit of $1.59 billion a year ago when Delta emerged from bankruptcy protection.

Excluding one-time items, Delta earned a profit of $137 million, or 35 cents a share, in the second quarter. Analysts polled by Thomson Financial, on average, forecast profit of 10 cents a share. Their estimates usually do not include one-time items.

American's parent AMR, meanwhile, said its loss in the second quarter was equivalent to $5.77 a share, compared to a profit of $317 million, or $1.08 per share, a year ago.

Excluding special charges to write down the value of its fleet, AMR said it would have lost $284 million, or $1.13 per share.

Analysts expected AMR to lose $1.40 per share. The company's revenue rose 5.1 percent to $6.18 billion. Fuel costs spiked to $2.42 billion - an increase of about $780 million from a year ago.