Major US airlines announced further 2011 capacity cutbacks to cope with the dramatic rise in fuel prices, and Delta Air Lines Inc said higher oil and the effects of the Japanese earthquake will hurt earnings in the current quarter.
"We're not anticipating any significant moderation" from current high fuel price levels, Delta President Edward Bastian told a J.P.Morgan investor conference on Tuesday. Carriers have steadily boosted fares this year as $100-a-barrel oil threatens to wipe out the industry's recovery from the 2008 and 2009 economic downturn.
Airlines are reporting higher demand, but costs are also rising. Delta currently estimates its fuel bill will rise about $3 billion for this year. That will result in a hit to first-quarter earnings. Bastian said the airline expects an operating margin of negative 2 to 3 percent for the period.
On Tuesday, airlines disclosed more plans to reduce flying in the face of uncontrollable jet fuel costs. US Airways Group Inc said its fourth-quarter system capacity would be down as much as 2 percent from previously expected levels, and Delta said it would scale back capacity both internationally and in the United States in the second half. Low-cost domestic carrier Southwest Airlines Co said its capacity plans for this year have not changed.
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