Airlines worldwide will likely lose $7.4 billion this year because of high oil prices, an industry trade group forecast Monday -- far worse results than expected.
The grim report from the International Air Transport Association came as airline customers, investors and employees prepared for Delta Air Lines' long-anticipated bankruptcy filing, which reportedly could come sometime this week.
Yet even amid the gloom, shares of American Airlines surged Monday on news that oil prices had receded from their $70 per barrel peak following Hurricane Katrina. Crude oil prices closed at $63 per barrel, and investors pushed shares of AMR Corp., parent of American Airlines, up $1.15, or nearly 10 percent, to close at $13.16 per share.
Continental Airlines also rose, climbing 97 cents, or about 8 percent, to finish at $13.08 per share.
Still, few had a positive outlook on airlines' immediate future. In its report, the association said U.S. carriers will lose a combined $8 billion, while European airlines should break even and Asian airlines might earn a profit.
Despite the retreat of oil prices Monday, Giovanni Bisignani, the association's chief executive, had harsh words for the energy industry.
"It is difficult to see this as anything other than a cash grab by the oil industry that is pouring salt into the wounds of a global crisis," he said in a prepared statement.
The group based its $7.4 billion loss forecast on average oil prices of $57 per barrel during 2005. Previously, the association had predicted oil would average $47 per barrel this year, which would have resulted in a $6 billion loss.
Overall, the industry's fuel bill has risen from $44 billion in 2003 to $97 billion this year, according to the report.
"Oil is once again robbing the industry of a return to profitability," Bisignani said.
Analysts surveyed by First Call/Thompson Financial predict American will lose about 39 cents per share, or nearly $480 million, this year. The only major carrier expected to be profitable is Dallas-based Southwest Airlines, which analysts predict will earn $40 million this year.
Complicating matters is Delta's expected bankruptcy. The Wall Street Journal reported Monday that the airline is close to securing $1.7 billion in financing that would keep it operating during a tour of bankruptcy court.
Most industry analysts have predicted in recent weeks that a Chapter 11 filing is almost inevitable, given fuel prices and the carrier's eroding financial reserves.
"At this point, the odds overwhelmingly favor a Chapter 11 filing," Mark Streeter, a bond analyst with J.P. Morgan Securities, said in a report Monday.
Delta shares plunged Monday, dropping 25 cents, or nearly 23 percent, to close at a record low 85 cents per share.
