UAL, US Airways lead slide on airlines' revenue outlook
US Airways Group Inc. and United Airlines parent UAL Corp. led shares of U.S. carriers lower on concern that domestic revenue declines have spread to international markets.
The Bloomberg U.S. Airlines Index, which includes 13 U.S. carriers, fell 4.1 percent to 18.80, the lowest value since June 1999. The index has tumbled 45 percent this year.
Passenger revenue on U.S. routes fell 4.2 percent in January from a year earlier, according to the Air Transport Association. International revenue slid 5.9 percent, the second straight monthly drop. Until recently, international demand and fares had held up in the recession better than in the U.S.
"The industry remains on the brink of a multi-quarter period of significant international weakness," William Greene, a Morgan Stanley analyst in New York, said today in a report to investors. "Additional capacity cuts in this segment are necessary and likely."
The biggest U.S. carriers each cut capacity by 10 percent or more in the last half of 2008 to better match demand and help boost ticket prices. Most of the cuts occurred in domestic markets, while some airlines since have announced planned reductions in international airplane seats for this year.
'Even More Challenging'
The January U.S. and international revenue numbers are "evidence of a very challenging environment that is likely to become even more challenging," Michael Linenberg, a Bank of America analyst in New York, said in a report.
Forecasts that U.S. carriers will have combined net income of about $4 billion this year should be reduced to about $2 billion, Linenberg said.
US Airways fell 48 cents, or 13 percent, to $3.12 at 4:15 p.m. in New York Stock Exchange composite trading, while UAL dropped 65 cents, or 11 percent, to $5.42 in Nasdaq Stock Market trading.
Continental Airlines Inc. fell 27 cents, or 2.5 percent, to $10.55, while Delta Air Lines Inc. slid 17 cents, or 3 percent, to $5.56 and American Airlines parent AMR Corp. dropped 15 cents, or 3.4 percent, to $4.29. Southwest Airlines Co., the biggest low-fare carrier, closed down 16 cents, or 2.4 percent, to $6.52.