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AirTran, JetBlue Clipped by Fuel Costs

Low-cost carriers AirTran (AAI) and JetBlue (JBLU - Get Report) on Thursday both reported record revenue, accompanied by losses due to sharply higher fuel costs.

Excluding special items related to fuel hedging, AirTran lost $61.9 million or 53 cents a share in the third quarter. Analysts surveyed by Thomson Reuters had estimated a loss of 39 cents. Revenue rose 10.6% to $673 million. Analysts had expected $676 million.

Including items, AirTran lost $107.1 million or 91 cents a share. In the same quarter a year earlier, it reported net income of $10.6 million or 11 cents a share. AirTran said fuel costs rose by $149 million from a year earlier.

JetBlue said it lost $4 million or 2 cents a share. Analysts had estimated a loss of 4 cents a share. Revenue rose 17.9% to $902 million. Analysts had estimated $899 million. In the same quarter a year earlier, JetBlue earned $23 million or 12 cents a share.

On an earnings conference call, AirTran CEO Bob Fornaro said "no major airline in North America has faced the same headwinds as AirTran." The carrier has not been cushioned from the domestic downturn by international routes, he said, and it has been more sensitive to oil price increases because oil accounts for 51% of its costs, the highest percentage among major carriers.

In the current quarter, revenue per available seat mile (RASM) is expected to increase by 7% to 9%, as capacity falls by 6% to 7%. A late Thanksgiving hurts November bookings, but December is "well ahead of last year," Fornaro said. With industry-low cost per available seat mile excluding fuel of 5.88 cents, "We are well-positioned to return to profitability in the coming quarters," Fornaro said.

Meanwhile, at JetBlue, "We see continued strength in our bookings in the near term," said CEO Dave Barger, in a prepared statement. During the quarter, RASM grew by 20.8% as capacity fell by 2.4%. CASM excluding fuel rose by 13.8% to 5.96 cents.

At Alaska (ALK - Get Report), net income excluding special items was $39.9 million or $1.10 a share. Analysts surveyed by Thomson Reuters had estimated 93 cents. Revenue rose by about 1% to $1.1 billion, slightly ahead of estimates. A year earlier, Alaska earned $78.8 million or $1.93 a share.

Including special items associated with fuel hedging, Alaska lost $86.5 million or $2.40 a share, reversing a year-ago gain of $81.8 million or $2.01 a share. Increased oil prices added costs of $110 million, the company said.

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