By Kyle Peterson and Mark McSherry
CHICAGO/NEW YORK (Reuters) - AMR Corp (AMR), parent of American Airlines, and Delta Air Lines Inc (DAL) reported large quarterly net losses on Wednesday, blaming depressed results on rising jet fuel prices that have forced widespread industry downsizing.
The losses for the second quarter -- which includes the start of the peak summer travel season -- set the stage for what is sure to be a troubling string of reports from major airlines this month.
Airlines shares, however, vaulted higher as the price of oil tumbled more than $4 a barrel after a government inventory report showed a surprise leap in crude supplies.
Soaring oil prices were the airline industry's worst enemy in the second quarter and the results of AMR and Delta reflected the burden.
"Q2 is generally the airlines' second best quarter, with the third quarter normally being the best," said Ray Neidl, airline analyst at Calyon Securities.
"So these results have to be disappointing," he said.
Still, excluding one-time items, AMR's loss was much smaller, and Delta actually posted a small profit. Both carriers' shares rose, with AMR up $1.27 or 28.8 percent at $5.68 and Delta up $1.18 or 25.3 percent at $5.85 in afternoon trade on the New York Stock Exchange.
Even as they have raised fares, airlines have been clobbered as the price of crude oil has notched record highs. The Air Transport Association, the main lobbyist for big airlines, sees a $10 billion industrywide loss this year.
Top carriers are cutting planes and routes as well as staff, hoping to simply survive.
AMR said it would trim domestic capacity up to 12 percent in the fourth quarter and head count by 8 percent. Delta has said it plans to cut domestic capacity 13 percent in the second half of the year and eliminate 2,000 jobs.
AMR RESULTS
AMR posted a quarterly net loss, reversing a year-earlier profit, as its fuel bill jumped 47.4 percent to $2.42 billion.
The company's loss, including special charges, amounted to $1.4 billion, or $5.77 per share, compared with a profit of $317 million, or $1.08 per share, a year earlier. Revenue rose 5.1 percent to $6.18 billion.
Excluding one-time items, the parent of the No. 1 U.S. airline said its loss was $248 million, or $1.13 per share.
Items included a $1.1 billion noncash accounting charge to write down the value of aircraft. Other charges related to capacity reductions.
The airline said it has hedged 35 percent of its anticipated third-quarter fuel consumption at an average crude oil equivalent cost of $95 per barrel.
For the third quarter of 2008, AMR said mainline unit costs are expected to increase 26.1 percent compared with the third quarter of 2007.
The company also said that given the shaky industry conditions, it has decided to place on hold the planned divestiture of its regional affiliate American Eagle.
"Our company continues to be severely challenged by the fuel crisis that has afflicted our entire industry, and we expect these difficulties to continue for the foreseeable future," Chief Executive Gerard Arpey said in a statement.
AMR ended the quarter with $5.5 billion in cash and short-term investments, including a restricted balance of $435 million.
DELTA RESULTS
Delta, which has agreed to buy Northwest Airlines Corp (NWA), reported a quarterly net loss of $1 billion, or $2.64 per share. Excluding special charges, however, Delta said it earned $137 million, or 35 cents per share.
Delta, which said the special charges were mainly for the impairment of goodwill, emerged from bankruptcy at the end of April 2007, so many year-earlier figures were unavailable.
Revenue rose about 10 percent to $5.5 billion. Delta ended the quarter with $4.3 billion in unrestricted liquidity, including $1 billion available under its revolving credit facility.
The airline said it expects capacity for the second half of 2008 to be down 4 percent compared with 2007, with its domestic capacity down 13 percent and international capacity up 14 percent.
During the quarter, Delta hedged 49 percent of its fuel consumption and realized $313 million in gains.
Delta said its merger is likely to close in the fourth quarter and it has reached a pre-merger joint bargaining agreement between the Delta and Northwest pilots.
The company upped its forecast for merger-related synergies to $2 billion from $1 billion by 2012. Delta said the savings and revenue will come mainly from combining the two carriers' networks.
(Editing by Gerald E. McCormick and Maureen Bavdek)
