Red Ink Looms at AWA
03-15-2005, 11:37 AM
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Red Ink Looms at AWA
Losses loom over America West
Results for 2005 to feel bite of record fuel prices, capacity
By August Cole, Marke****ch
Last Update: 2:03 PM ET March 15, 2005
SAN FRANCISCO (Marke****ch) -- America West Holdings said Tuesday that more red ink looms this year as the parent of the low-fare America West Airlines faces painfully high fuel prices and an oversupply of cheap seats in the domestic market.
What's more, cutting expenses can only go so far: In 2004, America West (AWA: news, chart, profile) lost $89 million after a profit in 2003.
"In spite of our diligent work to contain our costs, we believe revenues will continue to reflect the excess capacity that exists across the domestic system and fuel prices will remain at, or exceed, record highs," America West wrote in its 2004 filing with the Securities and Exchange Commission.
Analysts expect the carrier to bring in revenue of $2.44 billion this year, according to Thomson First Call, with a consensus loss of $3.68 a share amid a loss range of $2.05 to $5.25 to a share.
America West declined to comment further on the filing.
The carrier also said that in 2005 it will need to make loan repayments of $85.8 million on a government-backed loan, $41.3 million to redeem senior unsecured notes and a $167.8 million payment for off-balance sheet aircraft financing.
In this climate, competition is fierce not only among the low-cost carriers but also with the larger, established airlines. Delta Air Lines' (DAL: news, chart, profile) move earlier this year to cut back its costlier fares has caused pain for its rivals. Continental Airlines (CAL: news, chart, profile) recently said that the Delta fare cuts will reduce revenue by about $200 million, more than had been expected. See full story.
Phoenix-based America West also said in the regulatory filing that Delta's pricing is taking a toll.
"While America West still has lower business fares in most markets than those of Delta's, Delta's new pricing scheme has resulted in a reduction in the number of markets and magnitude of pricing advantages previously held by America West," the carrier added.
Delta itself is not immune to the effects of high fuel costs and cutthroat competition. The carrier's shares were roiled last week by its admission that it saw big losses this year and that fuel costs were much higher than it had expected. See full story.
A spate of recent airfare increases may help offset higher fuel expenses, but by how much remains to be seen. It's effectively the same situation the industry was in last year, too.
"Recent fare hikes are likely generating more press than revenue, but are clearly [a] positive," Lehman Bros. airline analyst Gary Chase wrote in a research brief on the sector Tuesday.
Results for 2005 to feel bite of record fuel prices, capacity
By August Cole, Marke****ch
Last Update: 2:03 PM ET March 15, 2005
SAN FRANCISCO (Marke****ch) -- America West Holdings said Tuesday that more red ink looms this year as the parent of the low-fare America West Airlines faces painfully high fuel prices and an oversupply of cheap seats in the domestic market.
What's more, cutting expenses can only go so far: In 2004, America West (AWA: news, chart, profile) lost $89 million after a profit in 2003.
"In spite of our diligent work to contain our costs, we believe revenues will continue to reflect the excess capacity that exists across the domestic system and fuel prices will remain at, or exceed, record highs," America West wrote in its 2004 filing with the Securities and Exchange Commission.
Analysts expect the carrier to bring in revenue of $2.44 billion this year, according to Thomson First Call, with a consensus loss of $3.68 a share amid a loss range of $2.05 to $5.25 to a share.
America West declined to comment further on the filing.
The carrier also said that in 2005 it will need to make loan repayments of $85.8 million on a government-backed loan, $41.3 million to redeem senior unsecured notes and a $167.8 million payment for off-balance sheet aircraft financing.
In this climate, competition is fierce not only among the low-cost carriers but also with the larger, established airlines. Delta Air Lines' (DAL: news, chart, profile) move earlier this year to cut back its costlier fares has caused pain for its rivals. Continental Airlines (CAL: news, chart, profile) recently said that the Delta fare cuts will reduce revenue by about $200 million, more than had been expected. See full story.
Phoenix-based America West also said in the regulatory filing that Delta's pricing is taking a toll.
"While America West still has lower business fares in most markets than those of Delta's, Delta's new pricing scheme has resulted in a reduction in the number of markets and magnitude of pricing advantages previously held by America West," the carrier added.
Delta itself is not immune to the effects of high fuel costs and cutthroat competition. The carrier's shares were roiled last week by its admission that it saw big losses this year and that fuel costs were much higher than it had expected. See full story.
A spate of recent airfare increases may help offset higher fuel expenses, but by how much remains to be seen. It's effectively the same situation the industry was in last year, too.
"Recent fare hikes are likely generating more press than revenue, but are clearly [a] positive," Lehman Bros. airline analyst Gary Chase wrote in a research brief on the sector Tuesday.
