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Airlines feeling the pain of oil prices
Northwest Airlines reported a first-quarter net loss of USD$1.1 billion on Wednesday, hurt by reorganization costs and rising fuel prices.
Northwest, which filed for bankruptcy in September, said the USD$1.1 billion loss compared with a net loss of USD$537 million a year ago.
Excluding reorganization and other costs, the carrier said it lost USD$129 million in the first quarter, compared with a loss of USD$450 million in the year-ago quarter.
The airline said it spent USD$975 million on reorganization items and that its fuel prices rose 35.6 percent.
“Northwest, like other airlines, is concerned about the impact of high fuel costs,” Chief Financial Officer Neal Cohen said in a statement. “Every dollar per barrel (of oil) increase impacts Northwest’s fuel costs by USD$43 million annually.”
Meanwhile Japan Airlines Corp. (JAL) reported a full-year operating loss on Wednesday on high oil prices, but kept its forecast of a profit for this year.
In addition to high fuel costs, JAL’s profit was hit by a management dispute and widely publicized safety problems that led many travellers to choose All Nippon Airways and other competitors instead.
The windfall helped ANA report a better-than-expected 14 percent rise in its 2005/06 operating profit last month, boosted also by its focus on business routes that are more profitable than flights to leisure destinations.
Record-high oil prices had weighed on ANA, but they hurt JAL’s earnings more because JAL earned more than half its air transport revenue on international routes, which need more fuel than domestic flights. ANA’s international flights contributed 18 percent of its revenue in the air transport operations.
For the past business year, JAL posted an operating loss of JPY26.8 billion (USD$242.6 million), smaller than the company’s forecast, thanks to strong results from subsidiaries and its restructuring efforts.
JAL said fuel costs climbed by JPY88 billion (USD$796.6 million), or 31 percent, from a year earlier and it was unable to offset the rise even with an increase in fuel surcharges.
The airline industry has suffered under the weight of soaring fuel costs and low-fare competition that makes it hard for carriers to raise ticket prices enough to cover costs.
Graham Muldoon
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