Airline fuel woes deepen, shares soar on oil dip
July 23rd, 2008 | by admin |By Kyle Peterson
CHICAGO (Reuters) - A quick look at U.S. airline shares on Tuesday showed double-digit oil-inspired gains across the board, but three gloomy earnings reports underscored the havoc that soaring energy prices have wreaked on carriers.
United Airlines’ parent UAL Corp (UAUA.O: Quote, Profile, Research, Stock Buzz), US Airways Group (LCC.N: Quote, Profile, Research, Stock Buzz) and JetBlue Airways (JBLU.O: Quote, Profile, Research, Stock Buzz) reported quarterly losses, blaming the fuel burden that has prompted industry downsizing.
The losses follow those reported last week by AMR Corp (AMR.N: Quote, Profile, Research, Stock Buzz), parent of American Airlines, and Continental Airlines (CAL.N: Quote, Profile, Research, Stock Buzz) and underscore the reality that high fuel costs are crippling the business and that drastic action is needed.
UAL raised the number of jobs it would need to cut to 7,000 — nearly 13 percent of its workforce — while US Airways upped its forecast for capacity cuts. JetBlue halted its near-term growth plans.
Airlines shares — especially UAL’s — vaulted higher despite the losses as the price of crude oil retreated further from a record high above $147 a barrel reached this month.
UAL shares rose 49 percent to $7.45 on Nasdaq. US Airways shares rose 36 percent to $3.67 on the New York Stock Exchange. JetBlue shares rose 21 percent to $4.70 on Nasdaq.
“Airlines stocks are totally sensitized to what happens to oil prices, for the very simple reason that fuel costs now exceed labor costs,” said Julius Maldutis, president of consulting firm Aviation Dynamics.
Maldutis’ outlook for the industry remains negative. He noted the recent closing of several small regional airlines.
