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By Dan Reed, USA TODAY
Already depressed airline stock prices tumbled further Tuesday as investors reacted to a slew of negative news, including signs of intensifying fare competition.
Delta Air Lines shares closed at $6.09, down 9.8%, after a morning announcement that it will take non-cash charges of $1.65 billion when it reports a second-quarter loss on Monday. The charges include $117 million to cover an unexpectedly high number of early retirements by pilots this year and $1.53 billion to reverse past income tax deferrals. Also Tuesday, New York-based discounter JetBlue said it is cutting the price on 1 million of its seats this fall by as much as half. The move follows other big autumn fare sales announced last week by discounters Southwest and AirTran. Fall fare sales are common. But intense competition makes these more threatening to airlines' revenues because they come early, have long sales windows and affect so many routes. J.P. Morgan analyst Jamie Baker cut his fourth-quarter profit estimate on JetBlue by 22%. JetBlue shares closed at $25.52, down 4.5%. Smith Barney analyst Daniel McKenzie downgraded shares of AMR, parent of No. 1 American Airlines. He said Delta and United are likely to win significant labor concessions within the next year, leaving American at a cost disadvantage. American received $1.6 billion in labor concessions from its unions in April 2003 as part of a restructuring that cut $4 billion in annual costs and kept it out of bankruptcy protection. AMR shares closed at $9.93, down 4.1%. It was the first time AMR shares had traded below $10 in about 11 months. The Amex Airline Index closed at 50.13, down about 4%. That's the lowest close since mid-May and nearly 30% off the 52-week high of 70.84 in mid-October. Two weeks ago, before a spate of downward estimate revisions by analysts and a new round of fare sales, the index topped 58. |
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