America West Posts Loss, More Losses Loom
Wednesday October 27, 2:01 pm ET
By Meredith Grossman Dubner
CHICAGO (Reuters) - America West Holdings Corp. (NYSE:AWA - News) on Wednesday posted a third-quarter loss and forecast losses going forward as soaring fuel prices, weak revenue and excess industry capacity broke a stream of profits at the parent of America West Airlines.
The Phoenix-based company also said it was scaling back growth plans for 2005, citing high jet fuel prices and too many seats for sale. Analysts have been critical of airlines for offering too many seats without adequate demand to fill them.
America West shares fell as much as 12 percent.
"We are disappointed to see our string of profitable quarters come to an end," Chief Executive Doug Parker said. "With no expected relief in fuel prices in the near term, we expect to report a significant loss for the current quarter and for the full year 2004."
The company's third-quarter loss amounted to $47.1 million, or $1.30 per share, compared with a profit of $32.9 million, or 60 cents a share, a year earlier.
Its results include $1.6 million of special charges related to the return of three Boeing 737-200 aircraft.
The loss far exceeded the average Wall Street estimate of 63 cents per share, with loss estimates ranging from 30 cents to $1.30 a share, according to Reuters Estimates.
The No. 8 U.S. airline said it now expects capacity growth in available seat miles of 3 percent to 5 percent next year, down from its previous growth target of 8 percent to 10 percent.
"After five profitable quarters, high fuel costs and a bad revenue environment were the culprits for the loss this quarter," Calyon Securities analyst Ray Neidl wrote in a research note. He said fuel costs remain a problem.
J.P. Morgan analyst Jamie Baker was upbeat on America West, given its plans to reduce 2005 growth.
"With shares near a 52-week low, capacity growth moderating, and a cost structure others airlines salivate over, America West now represents one of our top picks and our sole overweight-rated low-cost carrier," Baker wrote in a note.
America West also said it has not bid on the assets of bankrupt ATA Holdings Corp. (NasdaqNM:ATAH - News) although it continues to review the situation closely.
In a conference call with analysts and reporters, Chief Executive Doug Parker said he was confident that any bid by America West would be better for ATA employees and creditors than the current bid by AirTran Holdings Inc. (NYSE:AAI - News) But he said the carrier would not make a bid unless it could come up with one that did not put America West at risk.
Low-cost carrier ATA Airlines filed for bankruptcy on Tuesday and said AirTran Airways had agreed to pay $87.5 million for all 14 ATA gates in Chicago and certain slots in New York and Washington.
America West started transcontinental service in the fall of 2003. It was the first U.S. airline to win federal backing of loans from the Air Transportation Stabilization Board, a government agency set up after the Sept. 11, 2001, attacks.
Shares of America West were down 17 cents, or 3.8 percent, to $4.26 on the New York Stock Exchange on Wednesday afternoon.