REBECCA RAYKO / FLORIDA
Recovery in sight after top eight carriers end year with combined net losses of $3.2bn
The common theme to the latest round of earnings reports from the major US airlines was that after an abysmal year, the industry is now starting a gradual recovery.
Losses were expected given the huge drop in air travel last year, but nothing could reduce the impact of United Airlines' $2.1 billion net loss for the year - the worst in airline history. The news from United overshadowed even the number one carrier American Airlines' $1.7 billion loss for the year and the long beleaguered US Airways' $2 billion shortfall. Overall, the top eight US carriers ended the year with a combined net loss of $3.2 billion.
United's chief executive Jack Creighton highlighted the carrier's $2.6 billion in cash and its recently completed $775 million aircraft re-financing, and hinted that the airline might also apply for federal loan guarantees this year.
Like United, Delta had a healthy amount of cash on hand - $2.2 billion in liquidity - and $7 billion of unencumbered aircraft assets.
America West ended the year with $157 million in cash after securing a federal loan guarantee and other concessions. This has since increased to $400 million, thanks to a new round of financing.
Analysts found reason for optimism in fourth quarter figures. Low fuel prices and stronger traffic trends, particularly over the holidays, and the economic recovery due later this year have given rise to hope that the worst is over.
However, they warn that yields will only recover when the airlines stop offering large discounts on fares. Business travel, which was down 20% at United alone, must also recover to restore profits to the industry. Brian Harris of Salomon Smith Barney does not expect to see yields recover significantly before the third quarter of the year.
Despite some improvement, UBS Warburg analyst Sam Buttrick forecasts that American, Continental, Northwest and US Airways will report full-year losses again in 2002. Merrill Lynch's Mike Linenberg has predicted $1 billion losses for United and $101 million losses for America West in 2002, but believes that Delta will be profitable by the second half of the year.
Source: Flight International
