ATLANTA – Losses are adding up for airlines amid soaring fuel costs, leaving them little choice but to raise ticket prices again. As Delta Air Lines and American Airlines reported big second-quarter losses Wednesday, they signaled customers should expect higher costs.
There are signs that overall demand for flights within the U.S. is softening, but industry observers insisted that will not stop rising fares, more fees and fewer domestic flights.
“The first thing they have to do is forget about the butts in the seats and worry about the bucks in the till,” Minneapolis airline expert Terry Trippler said.
That point was underscored as Atlanta-based Delta Air Lines Inc. reported a $1.04 billion loss in the April-June quarter and Fort Worth, Texas-based AMR Corp., the parent of American, posted a $1.45 billion loss for the quarter. One-time charges and unprecedented fuel costs hurt both airlines, which saw their shares soar as their results beat Wall Street expectations and oil prices dropped.
The two carriers have posted combined net losses of $9.2 billion since the start of the year.
“Clearly, with fuel at these record levels, there’s no question … airfares need to go up,” Delta president Ed Bastian told reporters.
He added, “Will there be a tipping point, where demand is going to be affected? I think there already is a bit of a tipping point.”
According to Department of Transportation statistics released last week, the number of domestic passengers carried by U.S. airlines decreased 3.3 percent in April from a year earlier. Fares have risen more than 20 percent across the country since January, and much higher in smaller cities, according to Rick Seaney of FareCompare.com. Oil prices have doubled in the past year.
AMR chief Gerard Arpey said in a sluggish economy, high fares will cause some people to stop flying.
“We don’t believe we’re at that point yet, so we continue to believe the industry can sustain – we can sustain – higher prices, so we’re raising our prices,” Arpey told reporters on a conference call.