Airline losses narrow to $552 million

American Airlines and US Airways jets appear on April 23, 2012, in Arlington, Virginia Jim Watson/AFP/Getty Images

NEW YORK) U.S. airlines improved their financial performance in the first quarter, although they still lost money in what is traditionally the year's toughest travel period.

The airlines lost $552 million, or $3.30 per passenger, in the first three months as travel slowed after the holidays and delays racked up from snow storms. The airlines lost $1.7 billion in same period in 2012.

The industry's second-quarter results should show a hit tied to federal budget cuts. Looking further out, summer travel should pick up over last year but still trails its pre-recession peak, according to Airlines for America, the industry's lobbying group.

Airlines have been making a concerted effort to get their costs under control, said John Heimlichm, chief economist for the group.

That's a big challenge. Fuel accounts for more than a third of the airlines' costs and is largely out of their control. Airlines were able to lower debt and interest payments, Heimlichm said, but the biggest gains came from increasing airfares and charging more in fees.

Total operating revenue rose 2.5 percent year over year, according to a media presentation Thursday by Heimlichm.

As airlines take in more cash and remain profitable in other quarters, they are investing in new planes, better first-class seats, improvements to airport terminals, increased in-flight entertainment and better technology for tracking luggage.

Airlines are likely to take a financial hit to their second-quarter results due to lengthy delays in April caused by furloughs to air traffic controllers.

The Federal Aviation Administration had furloughed controllers for one week as part of a long-standing budget fight between Congress and the White House. About 7,200 flights were estimated to be delayed because of the controller shortage.

Airlines for America estimates that 600,000 passengers were delayed, costing the airlines $500 million.

Looking ahead to summer, the lobbying group expects 208.7 million people to fly in June, July and August, up from 206.6 million last year but still down from the 2007 peak of 217.6 million.

Planes will again be packed, the group predicts, with 86 to 87 percent of seats filled with paying passengers, about the same as the past four summers.

International travel, with its more expensive tickets, will continue to aid the U.S. airline industry: Some 27.4 million of this summer's travelers will come from outside the country, a record.

The lobbying group used Thursday's media briefing to reiterate its criticism of the Department of Homeland Security for a decision to open a customs and immigration pre-clearance facility in Abu Dhabi, the capital of the United Arab Emirates.

The only airline to fly directly from there to the United States is Abu Dhabi-based Etihad Airways, a rapidly growing carrier seen as a threat to many Western airlines on their lucrative international routes.

Heimlichm said the U.S. government should focus instead on dealing with the much larger amount of passengers coming from London, Toronto, Tokyo, Frankfurt and Paris and reducing their wait times.

"This is wrong,'' he said. "We need to fix the situation here.''

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