How airlines' finances have slipped over 2 years AMR Revenue change: -25% 2000: $23.3 billion 2002: $17.4 billion Operating loss: $4.6 billion 2001 loss: $2.0 billion 2002 loss: $2.6 billion The parent of American Airlines is losing money faster than any other=20 solvent airline. Management has targeted cost cuts worth $4 billion a year.= =20 So far, though, it has found only $2 billion to cut. Most of the rest will= =20 have to come from labor, with which management has had poor relations over= =20 the past decade. Still, the world's largest airline has $2.8 billion in=20 cash, thanks to $2.3 billion raised in the first nine months of 2002=20 through borrowing. It also has assets worth an estimated $6 billion that it= =20 could post as collateral on loans. The value of those assets is diminishing= =20 as the industry struggles and shrinks. Delta Air Lines Revenue change: -20% 2000: $16.7 billion 2002: $13.3 billion Operating loss: $2.0 billion 2001 loss: $1.1 billion 2002 loss: $944 million The No. 3 carrier is a favorite of airline analysts. Compared with American= =20 Airlines, its losses have been smaller, its cash resources are almost as=20 good, and its operating flexibility is better. With $2.6 billion cash and=20 an estimated $5 billion in assets that could be collateralized, Delta has=20 significant financial resources. Its flexibility stems from a=20 less-restrictive pilots contract and a largely non-union workforce. Flying= =20 in marginally profitable markets can easily be shifted to low-cost regional= =20 affiliates without negotiating new contracts as other airlines must=20 do. Still, Delta's unit costs =97 what it spent to fly one seat one mile = =97=20 were 20% higher than unit revenue in the fourth quarter. That gap may not=20 be fully closed even if it reaches its goal of $2.5 billion in annual cost= =20 cuts. Delta also is hounded more than any other traditional carriers by=20 low-cost competitors. Northwest Revenue change: -15% 2000: $11.2 billion 2002: $9.5 billion Operating loss: $1.0 billion 2001 loss: $591 million 2002 loss: $420 million The No. 4 carrier had a net loss of only $46 million in the third quarter=20 and had a tiny operating profit of $8 million in that quarter. Seasonal=20 weakness and the unexpected drop in winter demand likely made the=20 fourth-quarter loss much bigger, and the same effect will be seen in the=20 first quarter. But Northwest is much closer to profitability than most of=20 its rivals. It also has lost much less in the downturn than most of its=20 rivals. Cash is not an immediate problem. After drawing down all $1=20 billion of its available bank credit last year, it has $2.4 billion in=20 cash. That is a lot for a carrier less than half American's size. But=20 Northwest has no bank credit line in place and few assets it could=20 collateralize. Longer term, its $6.1 billion in debt and capital leases is= =20 a potential problem, even if business does pick up. Continental Revenue change: -15% 2000: $9.9 billion 2002: $8.4 billion Operating loss: $168 million 2001 profit: $144 million 2002 loss: $312 million The USA's fifth-largest airline posted a relatively modest operating loss=20 last year =97 $312 million. Continental's advantages: lower costs because= of=20 higher labor productivity and moderate wage scales compared with bigger=20 carriers. Those strengths are partly because of two bankruptcy=20 reorganizations since the mid-1980s. Keeping those advantages is a concern= =20 as the company negotiates a new contract with the pilots union. Management= =20 has a record of maintaining labor peace without giving away the store. The= =20 downside: Both Continental's route network and its balance sheet are weaker= =20 than those of its rivals, leaving it more vulnerable to big market shocks.= =20 It ended 2002 with only about $1.3 billion in cash, little available credit= =20 and few assets it can use as collateral. Last month, it pledged spare=20 engines and parts as security for a $200 million loan. Southwest Revenue change: -4% 2000: $5.7 billion 2002: $5.5 billion Operating loss: $1.1 billion 2001 profit: $704 million 2002 profit: $366 million Southwest's profits have been cut in half during the downturn, but it's the= =20 only carrier that has remained profitable throughout the past two years.=20 While other major airlines have been shrinking, it has continued growing.=20 The nation's sixth-largest airline also has cut its debt and lease=20 obligations by more than 40%. That means it can pounce on opportunities as= =20 ailing carriers scale back in markets where Southwest wants to grow.=20 Southwest did that in the early 1990s when Midway Airlines collapsed.=20 Today, Southwest dominates travel pricing across the Midwest from its=20 stronghold at Chicago's Midway Airport. Alaska Air Revenue change: 1% 2000: $2.18 billion 2002: $2.21 billion Operating loss: $204 million 2001 loss: $112 million 2002 loss: $92 million Alaska is only one-ninth the size of American. Yet the smallest of the=20 nation's majors in terms of traffic is outperforming all but Southwest,=20 earning profits of $3.9 million and $25.3 million in the second and third=20 quarters, respectively. The Seattle-based carrier also has about $660=20 million in cash. That, along with a debt-to-capital ratio in the low 70%=20 range, gives it one of the industry's strongest balance sheets. America West Revenue change: -13% 2000: $2.3 billion 2002: $2.0 billion Operating loss: $437 million 2001 loss: $276 million 2002 loss: $161 million The No. 8 carrier avoided bankruptcy court in 2002 by landing a $390=20 million federal loan guarantee. It now has about $420 million in cash,=20 which analysts believe will be sufficient unless there's an extended war or= =20 terrorist attack. America West lost $31 million in the third quarter.=20 Fourth-quarter results will be released Thursday. Its revenue per seat per= =20 mile flown has declined the least of any major airline because it's less=20 dependent on high-fare business travelers than competitors. The downside:=20 It also collects the least revenue per seat-mile because it gets fewer=20 business travelers. In March, it was the first to adopt a simplified,=20 lower-price structure =97 something its larger competitors only began=20 experimenting with in the fall. The airline's network is small and=20 dependent on leisure travelers. Note =97 Continental and Delta figures are actual results. All other 2002=20 figures are estimates provided by UBS Warburg. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@escape.ca Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.atlanticlng.com TnT Webdirectory: http://search.co.tt *********************************************************