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American Airlines says fuel increases may cost $1.4 bln
Tue Mar 22, 2005 02:14 PM ET
NEW YORK, March 22 (Reuters) - American Airlines, the No. 1 U.S. carrier, could see its costs surge $1.4 billion this year if the price of fuel remains at the current level, its chairman and chief executive said on Tuesday.
The increase would come on top of $1.1 billion in higher costs that hit the unit of AMR Corp. (AMR.N: Quote, Profile, Research) in 2003 and illustrates the hurdles that American and other top U.S. airlines face in trying to regain profitability.
"With the cost of oil at these levels, fares should be rising much faster," Gerard Arpey said at a transportation conference sponsored by investment bank Goldman Sachs Group Inc., calling the current price of oil a "daunting reality."
He said the $1.4 billion cost was based on "the forward curve as it was last week," which he said indicated prices of $1.65 a gallon.
American's annual costs rise by $80 million for each dollar increase in crude oil prices, he said.
Arpey also said some rivals had excessively blamed sweeping fare cuts initiated by Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) for weak earnings so far this year, adding that some analysts have overestimated the probable impact on American in particular.
"I've seen all kinds of numbers from $500 million to $1 billion, I think those numbers are exaggerated," he said.
Tue Mar 22, 2005 02:14 PM ET
NEW YORK, March 22 (Reuters) - American Airlines, the No. 1 U.S. carrier, could see its costs surge $1.4 billion this year if the price of fuel remains at the current level, its chairman and chief executive said on Tuesday.
The increase would come on top of $1.1 billion in higher costs that hit the unit of AMR Corp. (AMR.N: Quote, Profile, Research) in 2003 and illustrates the hurdles that American and other top U.S. airlines face in trying to regain profitability.
"With the cost of oil at these levels, fares should be rising much faster," Gerard Arpey said at a transportation conference sponsored by investment bank Goldman Sachs Group Inc., calling the current price of oil a "daunting reality."
He said the $1.4 billion cost was based on "the forward curve as it was last week," which he said indicated prices of $1.65 a gallon.
American's annual costs rise by $80 million for each dollar increase in crude oil prices, he said.
Arpey also said some rivals had excessively blamed sweeping fare cuts initiated by Delta Air Lines Inc. (DAL.N: Quote, Profile, Research) for weak earnings so far this year, adding that some analysts have overestimated the probable impact on American in particular.
"I've seen all kinds of numbers from $500 million to $1 billion, I think those numbers are exaggerated," he said.
