Airline execs eye consolidation

Source:ap.org Author:CHRIS KAHN Date:03/25/14 Click:

PHOENIX - As U.S. airlines pressure each other with low fares, executives are keeping an eye on consolidation efforts as the one sure way to squeeze profits out of an industry plagued by sky high fuel costs.

Many carriers have tried to boost profits by offering travelers fewer seats. But US Airways Group Inc. Chairman and Chief Executive Doug Parker said Thursday that airlines only have so much capacity left to trim on their own, probably less than 5 percent.

"Consolidation allows you do something much more than that," Parker said. He added that when America West Airlines combined with the former, Virginia-based US Airways, it was able to cut capacity by 15 percent as it merged networks.

Alaska Air Group Inc. has tried raising ticket prices, but Chief Financial Officer Brad Tilden said Thursday the company has had mixed results. The Seattle-based carrier hiked prices as much as $20 in certain markets, but it wasn't able to push through any increases in others.

Meanwhile, oil prices soared past $100 a barrel before dropping to about $88 a barrel.

"What would have been a profitable quarter has turned negative because of this large spike in fuel costs," Calyon Securities analyst Ray Neidl said.

During the three-month period that ended Dec. 31, US Airways posted its first loss in five quarters, and parent company of Alaska Airlines and Horizon Air said its earnings swung to a loss when adjusted for fuel and special items.

US Airways shares dropped 48 cents, or 3.7 percent, to $12.66 Thursday. Alaska Air Group shares dropped $1.98, or 8 percent, to $22.71.

The news was similar earlier this week with other major U.S. carriers. Delta Air Lines Inc. and the parent companies of United Airlines and American Airlines also posted losses this quarter. Southwest Airlines Co., however, doubled its fourth-quarter profit thanks to superior hedging against high fuel costs.

"It's frustrating to report a fourth-quarter adjusted loss in what has been a solid year relative to other carriers," Alaska Air Group Chief Executive Bill Ayer said in a statement. "The loss was driven primarily by skyrocketing fuel costs combined with fares that have not kept pace."

Parker, who has long praised the financial benefits of airline consolidation, wouldn't comment about whether US Airways was talking with another airline about combining.

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