Washington, D.C. (AP) -- Two of the biggest U.S. airlines reported second-quarter profits on Wednesday, benefiting from increased passenger demand and reduced labor expenses that helped offset soaring fuel costs.
AMR Corp., the parent of American Airlines, earned $58 million in the April-June period, while Continental Airlines Inc. posted a $100 million profit. Both carriers' results exceeded analysts' expectations.
The positive news does not mean the long-suffering sector is on the verge of an upswing, however. Analysts expect domestic airlines to collectively lose some $5 billion in 2005 and executives at American and Continental stressed that more cost-cutting will be needed to stay competitive with low-cost rivals such as Southwest Airlines Co., which last week recorded its 57th consecutive quarter of profitability, with earnings of $159 million.
Continental Chief Executive Larry Kellner said in a conference call that he expects ''at least one, maybe a couple of bankruptcies'' among competitors. Continental, while itself not on the cusp of Chapter 11, isn't out of the woods yet.
''We expect to incur a significant loss for 2005,'' Jeff Misner, the company's chief financial officer, said.
The largest airline at risk of a bankruptcy filing these days is Delta Air Lines Inc., which is scheduled to report its second-quarter results on Thursday. On Wednesday, the carrier abruptly replaced its chief financial officer, citing in a press release a growing urgency to turn its business around.
AMR's profit was equivalent to 30 cents per share, a significant improvement from last year's net income of 3 cents per share, or $6 million. It beat the 15-cent-per-share estimate of analysts surveyed by Thomson Financial and was the company's first net profit that did not include special items since the fourth quarter of 2000.
Second-quarter revenue at the Fort Worth, Texas-based airline rose 10 percent to $5.31 billion, compared with $4.83 billion a year earlier.
Passenger traffic grew by 7.4 percent, ahead of seat capacity which increased by 2.3 percent. Its planes were 79.5 percent full for the quarter, compared with 75.7 percent a year ago.
AMR Chief Executive Gerard Arpey credited the company's success to the hard work of its employees and said workers will have to become even more efficient in order for the company to prosper in the face of sky-high fuel prices. The company's fuel costs climbed 47.2 percent to $1.35 billion in the quarter.
''Unfortunately, there doesn't seem to be any relief in sight -- oil prices in the second half of the year are currently projected to be higher than during the second quarter,'' Arpey said in a statement. ''As a result, we have no choice but to redouble our efforts to wring cost and inefficiency out of everything we do.''
The high cost of fuel is an industrywide problem.
The price of jet fuel is up 58 percent from a year ago at about $1.75 per gallon on the New York spot market, according to government statistics. In 2000, the last full year in which the U.S. airline industry was profitable, jet fuel costs averaged 78.6 cents per gallon, according to the Air Transport Association, an industry trade group.
Continental Airlines' net income equaled $1.26 per share, reversing a year-ago loss of $28 million, or 43 cents per share. Excluding a gain from the contribution of ExpressJet Holdings Inc. shares to its pension plan, Continental said its adjusted income was $53 million, or 69 cents per share, in the latest quarter.
Net income totaled $100 million, or $1.26 per share, compared with a loss of $28 million, or 43 cents per share, a year ago.
-- July 22--AMR Corp., the parent of American Airlines, posted a second-quarter loss of $10.7 million, or 3 cents a share, as fuel costs rose to $1.65 billion, 24.1 percent higher than...