AMR, Delta post big losses, largely due to fuel costs

— -- They are just the first in an expected string of horrendous second-quarter results from a group of companies whose existence industry analysts say is threatened by record high oil prices.

AMR's and Delta's losses each include $1.2 billion in charges related to grounding planes and reducing head count. Along with dramatic price increases, those are the biggest steps airlines are taking to counter the impact of jet fuel prices now over $4 a gallon.

They paid about $2 a gallon a year ago.

Excluding one-time items, American's parent lost $284 million in the quarter. That's a $601 million swing from the $317 million profit it recorded a year earlier.

Delta, excluding one-time items, earned a $137 million profit in the quarter ended June 30. The Atlanta-based airline earned $274 million in the year-ago period.

Both airlines' results, excluding one-time items, beat Wall Street analysts' expectations, and were largely the result of big increases in revenue per passenger.

With oil prices Wednesday falling for the second day in a row — to $134.60 a barrel for light, sweet crude on the New York Mercantile Exchange — both airlines' stocks soared.

AMR rose nearly 32% to $5.82 a share, and Delta closed up almost 27% to $5.91.

AMR Chief Executive Gerard Arpey said fare and fee increases boosted revenue, but warned in a letter to employees that additional increases are unlikely to have similar results because the airline is "bumping up against a couple of hard realities" including a sagging economy that makes consumers "even more sensitive to price."

Ed Bastian, Delta's president and CFO, said "a bit of a tipping point" has arrived where higher prices are beginning to suppress travel demand.

Both carriers now are preparing for what could be the worst financial storm in the industry's turbulent history.

By November American's domestic capacity will be down 13% vs. November 2007, while Delta's will be down 11.6%.

They also are building up their cash balances for anticipated tougher times ahead.

American's cash balance rose $600 million in the quarter to $5.5 billion on June 30. It has raised $720 million since the end of the first quarter by refinancing some of its planes.

Both airlines said they have decided against selling their regional airline subsidiaries for now.