Atlanta-based AirTran Airways is being squeezed by high fuel costs and low fares.
Discount airline AirTran Airways demonstrated that even low-cost airlines aren't immune from high fuel prices Tuesday, as the carrier posted an $8 million loss for the first quarter.
Executives with AirTran, which operates at Dallas/Fort Worth Airport, said costly fuel and intense competition on the East Coast were responsible for the loss, which compared with a $4 million profit for the first quarter of 2004.
The first quarter is typically the slowest period of the year for the airlines.
Kevin Healy, the airline's vice president of planning, said bookings remain strong at D/FW. The airline is adding a third nonstop flight to Los Angeles International Airport this summer, as well as a third nonstop flight to Las Vegas, he said.
But he said no cities will be added soon. AirTran has nonstop flights from D/FW to Atlanta, Orlando and Fort Lauderdale, Fla., Baltimore/Washington, Los Angeles and Las Vegas, as well as connecting flights to destinations nationwide.
"Every one of our flights is a top-10 market, so we feel pretty good about where we are right now," Healy said. He also acknowledged that AirTran has a "tough competitor" at D/FW: American Airlines.
While it accounts for less than 2 percent of D/FW's market share, AirTran has a larger effect on fares locally, because it forces other airlines to compete and reduce prices.
Healy said AirTran didn't receive much benefit when Delta Air Lines closed its D/FW hub in January.
"Delta was more about connecting traffic, rather than the local market, which is our focus," he said. "So other than a small bump on a few flights, it didn't make much difference."
Stan Gadek, the airline's chief financial officer, said AirTran might lease its new airplanes to other airlines instead of putting them into service, if fuel prices remain high.
"At some point, we'd have to consider slowing our growth down if fuel stays at this point," he said during a conference call with reporters.
Ray Neidl, an airline analyst with Calyon Securities in New York, lowered his rating on AirTran after the quarter's results.
In a report to investors, he said he was concerned about AirTran "having limited ability to raise ticket prices and the possibility of slower growth if in fact fuel prices stay high."
Investors dumped AirTran's stock on the news. The airline's shares (ticker: AAI) fell 46 cents, or about 5 percent, to close at $8.29 per share Tuesday.
