America West Warns, Airline Shares Slump

Soaring jet fuel prices, fare wars and overcapacity are making profit a rarity in the industry.
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Airline stocks slumped across the board Tuesday after

America West Holdings

(AWA)

issued a grim bottom-line forecast and crude oil prices surged toward $51 a barrel.

The nation's eighth-biggest carrier announced it expected "significant" losses for both the third and fourth quarters -- blaming the current tough pricing environment as well as the high price of jet fuel -- despite posting record traffic in September. Shares fell 38 cents, or 6.8%, to $5.17.

Analysts expected the carrier to post EPS losses of 45 cents in the third quarter, 71 cents in the fourth quarter and $1.02 in the full-year period, according to Thomson First Call.

Oil again breached the key $50 threshold Tuesday, highlighting airline concerns about the already skyrocketing price of fuel, which is the second largest cost for carriers, behind labor expenses. Susan Donofrio, an analyst at Fulcrum Global Partners, said fuel now accounts for roughly 17% of airlines' costs, compared with the historical average of about 12%.

AMR

's

(AMR)

American Airlines, the world's largest carrier, has said it will spend $1 billion more this year on fuel than last year and added a nominal surcharge to round-trip tickets to help cover the expense. Shares of AMR fell 25 cents, or 3.2%, to $7.49.

Other carriers shared the pain:

Continental Airlines'

(CAL) - Get Report

shares were off 20 cents, or 2.2%, at $8.78; and

Delta Air Lines'

(DAL) - Get Report

declined 15 cents, or 4%, to $3.60. The Amex Airline Index fell 2%.

Shares of discount carriers also lost ground, as

JetBlue Airways

(JBLU) - Get Report

stock fell 47 cents, or 2.2%, to $21.13 and

Southwest Airlines

(LUV) - Get Report

stock was down 12 cents, or 0.8%, at 14.09.

Fuel is just one of the problems facing airlines now. The third quarter, traditionally bolstered by summer vacation travel, was weak. Under pressure from leaner discount airlines, large carriers are scrambling to slash costs and either avoid seeking bankruptcy protection or -- in the case of

US Airways

(UAIRQ.OB)

and

UAL Corp.

(UALAQ.OB)

-- emerge from it. Continental Monday released performance figures -- a key barometer for the industry -- showing September unit revenue declined from the year before in the current cutthroat pricing environment.