Earnings up, but US Airways, Delta post losses on higher fuel prices

Surging jet fuel prices hit airlines hard in the first quarter, but higher revenue from raising passenger fares, fuel surcharges, and fees helped narrow the losses.

US Airways Group Inc. and Delta Air Lines Inc. reported quarterly losses Tuesday, but earnings reports were better than expected, helping send airline stocks higher.

US Airways' traffic climbed 4.5 percent and revenue rose 12 percent in the first three months, but the price of jet fuel was up 33 percent from a year ago.

"Fuel is now by far our largest expense" and amounted to about $1 billion in the first quarter, US Airways chief executive officer Doug Parker told investors.

Philadelphia's dominant airline posted a loss of $114 million, or 71 cents a share - more than double the $45 million loss, or 28 cents a share, a year ago.

Delta, the nation's second-largest airline, lost $318 million, or 38 cents a share, compared with a loss of $256 million, or 31 cents a share, in the quarter last year.

Delta was hurt by 30 percent higher fuel prices, a $90 million loss due to winter storms, and $35 million in losses from the earthquake and tsunami in Japan.

Delta offset 70 percent of its jet fuel costs with fare increases and international fuel surcharges.

Looking ahead, Delta said bookings for May and June and into the summer were strong. "We're expecting double-digit yield improvements in many of our markets through the summer," Delta president Edward Bastian told investors.

Business demand remains strong, US Airways president Scott Kirby told investors. "We continue to see a strong pricing environment and improving corporate demand, consistent with strong underlying demand trends," he said.

Airlines have raised fares seven times since Jan. 1 and are likely to continue raising ticket prices.

"Fuel is the biggest challenge facing this industry, and Delta is actively reducing capacity, implementing fare actions, hedging our fuel needs, and attacking our cost structure in order to offset fuel's impact," said Delta's CEO Richard Anderson.

Southwest Airlines Co. was the only major U.S. carrier to report a modest first-quarter profit - $5 million, or one cent a share - last week, while United Continental Holdings reported a loss of $213 million on $560 million in higher fuel costs, and American Airlines posted a loss of $436 million, as its fuel bill rose by $366 million for the quarter.

Airlines have responded by raising fares, cutting capacity, and putting expansion plans on hold.

US Airways and Delta said they would cut seat capacity and flights in the second half of the year. Delta said it would trim total capacity by 4 percent, and trans-Atlantic trips by 8 percent to 10 percent, after the summer.

US Airways disclosed plans to reduce total systemwide seats and flights by 1 percent after July, which was in addition to a 1 percent capacity reduction announced in March.

Delta's first-quarter "earnings surprise" was due to strong passenger revenue, up by 13 percent, and "driven by strong pricing in the domestic, Pacific and Latin American markets," airline analyst Helane Becker of Dahlman Rose & Co. wrote in a client note.

US Airways' shares rose 52 cents, or 6.3 percent, to $8.80. Delta climbed 99 cents, or 11 percent, to $9.99.