U.S. carriers Southwest Airlines and United Airlines parent UAL on Tuesday reported gains for the second quarter, while Continental Airlines posted a large loss.
And all the airlines announced job cuts or revenue-boosting measures, as the profits were overshadowed by weak travel demand and rising fuel costs and prospects for the industry remain uncertain.
Dallas, Texas-based Southwest, the largest low-fare carrier in the country, said Tuesday it broke a string of three consecutive losing quarters by earning 54 million U.S. dollars in the quarter ended June 30, narrowly beating Wall Street estimates. The gain was far less than the 321 million last year.
Southwest CEO Gary Kelly said he was proud of the company's second-quarter gain in "one of the worst revenue environments for the airlines." But he warned the worst still exist and they "cannot predict a profitable third quarter" because of weak travel demand and increased fuel prices.
"Unless demand rebounds significantly, we expect third quarter 2009 unit revenues to decline year-over-year more than the second quarter decline of six percent due to more difficult comparisons," Kelly said.
To further cut costs, Southwest said Tuesday that, on top of other cost containment measures such as a hiring freeze and a pay freeze for management, 1,400 employees, about 4 percent of Southwest's workforce, had accepted early-out offers of cash and travel benefits.
UAL, the nation's third largest airline company after Delta and American parent AMR, on Tuesday reported a surprising profit of 28 million dollars for the second quarter, thanks to fuel-hedging gains. The company announced that it would cut capacity on international flights by another 7 percent this fall to meet lighter demand.
Houston-based Continental Airlines on Tuesday reported a big second-quarter loss of 213 million dollars and said it would slash 1,700 more jobs. The carrier blamed traffic declines, lower fares and the A/H1N1 flu outbreak for reducing the company's second-quarter revenue by estimated 50 million dollars.
The 1,700 jobs to be eliminated include management and clerical, Continental said. Other measures include increasing by 5 dollars the fees for flight reservations taken over the phone and domestic checked baggage fees for customers who do not repay those fee online.
United, Delta and US Airways have announced similar fee increases over the last few weeks, charging another 5 dollars for checking baggage at the airport.
Since the recession got worse last fall, air traffic in the country has declined every month compared with a year earlier. Business travel has been especially hard hit, according to local media reports.
Business travellers are airlines’ most profitable customers, often buying first-class seats or pricey last-minute fares. When those people stopped travelling, airlines have to cut fares to fill seats with bargain-seeking leisure travellers.
With business travellers replaced on many planes with leisure travellers, average fares fell and led to declines in revenue that ranged from 8.8 percent at Southwest and 25.2 percent at UAL.
Business traffic is the key to recovery in the slumping airline industry, according to Continental CEO Larry Kellner.
“We're working our business (traveller) side very hard because clearly this is where we could also see a recovery much more quicker if we could get the business traffic back on the airplanes,” he said at an investor conference last month.
But Continental president Jeff Smisek said there are no signs yet of the return of the business travel.