AirTran Swings to Loss

However, the carrier promises a full-year profit.
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AirTran

(AAI)

lost $4.3 million in the third quarter and said it also expects a slowdown in the current quarter's unit revenue growth.

The Orlando-based carrier said the disclosure of a U.K. terror plot in August and the subsequent changes in security regulations reduced its revenue by $8 million to $12 million. The impact continued into October, said CEO Bob Fornaro, on a conference call.

The downturn began at the start of mid-August through mid-November, AirTran's weakest period. AirTran has a high level of Florida service, and those weeks see less demand for travel.

For the quarter, the carrier lost 5 cents a share, and revenue was $487 million, up 30.1%. Analysts surveyed by Thomson Financial had expected per-share income of 4 cents on revenue of $494.6 million.

The results include a noncash charge of $1.5 million, or 2 cents a share, to record a liability from a free-ticket promotion. The amount will be recognized as future when the tickets are used. In the third quarter of 2005, AirTran made $1 million, or 1 cent a share.

"We would have liked to be profitable for the third quarter," Fornaro said. "We aren't, but the game doesn't end. We're going to be profitable for the year."

AirTran also said it will slow its rapid growth. It will take delivery of 14 Boeing 737s in 2007, five fewer than planned, and 15 in 2008, three fewer than anticipated. Capacity grew by 25% in the third quarter, and it will likely expand by 20% in the fourth quarter and by 18% to 20% in 2007.

AirTran shares fell by 2.4% to $10.69 Thursday.

Third-quarter passenger revenue per available seat mile rose just 2%, to 9.41 cents. Load factor was 73.2%, down 3.1 points. On the cost side, cost per available seat mile, excluding fuel, declined by 4% to 6.04 cents.

Fornaro noted that industry capacity is growing in the eastern U.S., but he said primary competitor

Delta Air Lines

(DALRQ)

has not sufficiently reduced domestic costs during bankruptcy. Although Delta has cut overall CASM by adding longer, international flights, he said Delta's domestic costs remain high.

"Domestically, our

cost advantage is in the 34% to 40% range, as big as it's ever been," Fornaro said. "And when they come out

of bankruptcy, that will be as low as their costs will be, but we believe our costs will go down next year."