Houston-based Continental Airlines narrowed its first-quarter loss, and Dallas-based Southwest Airlines scratched out a small profit as both airlines struggled with higher fuel prices.
Continental, the nation’s fifth-largest airline in terms of traffic, had a net loss of $124 million ($1.88 per share) in the first quarter, compared with a loss of $221 million ($3.38 per share) for the first quarter of last year. Revenue jumped 11% to $2.27 billion from $2.04 billion. Business travel remained weak, as only 32.7% of Continental’s revenue came from high-priced business fares, down 4.8 percentage points from a year earlier. Fuel costs at Continental’s mainline operation jumped 6.1% over the high prices airlines faced a year ago amid Iraq war preparations.
The combination of high fuel costs and low fares has made for a very difficult environment for airlines, Continental’s chairman and chief executive, Gordon Bethune, warned “This is not sustainable. This industry doesn’t work at $38-a-barrel oil.”
Southwest, the sixth largest U.S. airline, remained profitable through the combination of lower costs than competing airlines and strong hedges it had in place against higher fuel prices. First-quarter net income rose 8.3% to $26 million from $24 million a year earlier while earnings per share remained flat at three cents. Revenue rose 9.8% to $1.48 billion from $1.35 billion, and the company offset higher fuel costs with $63 million of commodities hedging gains. Southwest’s mix of full-fare traffic, typically business travelers, was 36%, about the same as in the year-earlier period.
In other Continental news, this NY Times article reports on Continental’s offer to buy Colombia’s financially troubled airline, Avianca.