Just as we’ve seen in previous quarters, the regional programs at Delta and Continental posted profits for the quarter, while expenses for the regional affiliates at American overwhelmed revenues. The results came as Delta and Continental reported losses in the third quarter and AMR Corp, parent company to American eked out a slight profit.

American
American Airline’s regional affiliates posted losses as expenses rose nearly $100 million from $701 million in the year-ago quarter to $798 million in the third quarter 2008. The operations earned $668 million, up 3.1 percent. For the quarter, revenue passenger miles dropped 12.2 percent to 2.293 billion, while available seat miles, declined four percent to 3.305 billion. Load factor dropped 6.5 points to 69.4 percent.
AMR expects regional affiliate capacity to decline by 10.8 percent in the fourth quarter of 2008 compared to the prior-year period and expects 2008 regional affiliate capacity to decline by 5.7 percent compared to 2007 levels.
AMR Corporation reported a $45 million net profit in the third quarter but only on the sale of American Beacon Advisors for $432 million during the quarter. The company also recorded $27 million in one-time severance and aircraft charges related to its fall 2008 capacity reduction. Going forward, the company expects remaining special charges of approximately $121 million for this event, primarily representing the present value of remaining lease payments on A300 aircraft at the time these aircraft are permanently retired.
Excluding special items, the company reported a loss of $360 million for the third quarter. The current quarter results compare to a net profit of $175 million for the third quarter of 2007, or $0.61 per diluted share, which included the impact of a $40 million charge for additional salary and benefit expense accruals as previously disclosed.

Continental
Continental’s regional operations posted a profit having brought in $614 million in passenger revenues, up 7.2 percent. Regional RASM was up 0.9 percent while ASMs jumped 6.2 percent. Even so, regional expenses followed the mainline with whopping increases. Capacity purchase costs were up 24 percent to $553 million for the quarter and 24.9 percent to $1.648 billion for the nine months.
Meanwhile, Continental Airlines reported a third quarter 2008 net loss of $236 million ($2.14 diluted loss per share). Excluding $91 million of previously announced special items, Continental recorded a net loss of $145 million ($1.32 diluted loss per share).
Total revenue for the quarter was $4.2 billion, an increase of 8.8 percent ($336 million) over the same period in 2007. Passenger revenue for the quarter grew 7.1 percent ($249 million) compared to the third quarter of last year, and includes a $27 million increase in revenue related to a reduction in the company's frequent flyer liability
Continental regionals carrier 4,590,000 passengers during the quarter, down 0.5 percent. RPMs dropped 0.8 percent to 2.518 billion while ASMs increased 6.2 percent to 3.390 billion. Load factor declined 5.2 points to 74.3 percent.
Passenger revenue per available seat mile rose 0.9 percent to 18.12 cents while average yield per revenue passenger mile jumped 8.1 percent to 24.39 cents. The fleet increased 6.1 percent to 279 aircraft.

Delta
Passenger revenue for the Delta regional airline operations dropped during the third quarter when revenues reached $1.057 billion, down 3.8 percent from the year-ago period. The posting came on an 11.9 percent drop in capacity although unit revenue was up 9.1 percent and yield was up 8.1 percent. Contract carrier expenses rose 11 percent to $905 million, making the operation profitable. For the nine months contract carrier operating revenues were up from 3.155 billion for the first nine months of 2007 to $3.239 billion this year. Operating expenses for the nine months, jumped as well from $2.301 billion to $2.732 billion.
Meanwhile, Delta’s fortunes swung wildly in the third quarter during which it posted a pre-tax loss of $50 million. Excluding special items, Delta reported a pre-tax loss of $26 million in the third quarter compared to pre-tax income of $363 million in the third quarter of 2007. The year-over-year decrease in pre-tax income was driven by higher fuel prices, partially offset by a nine percent increase in operating revenue.

Profits for ’08?
Despite dismal Q3 results, analysts are predicting that the dramatic drop in oil prices could mean profits for the airline industry this year given the rising revenues brought in the new fees. However, others are saying that recent fiscal news will drop demand well below the capacity cuts already made by U.S. airlines this year which could fulfill expectations of losses for the airlines.
Jamie Baker of J.P. Morgan Chase expects a profit next year for the airlines he follows despite such demand calculations, saying he is having “a tough time modeling losses” for the sector, according to research notes published recently. The airlines he follows will all become profitable next year despite experiencing one of the weakest demand periods in history. He indicated the industry could save $23 billion just on the $1.25 drop in the price per gallon of fuel and the Air Transport Association’s calculation that every penny increase in fuel increases industry fuel costs by $187 million.
Airlines could take a six percent hit in falling annual revenues and still make money next year with the $20 decline in oil prices recently, said Baker, who noted that such a drop has never been seen before. He pointed to the two percent drop in annual revenues in the 1991 recession and a 1 percent drop in the 12 months before 9/11 when the dot.com bubble burst. Even with the combined hits of SARS and the Iraq War in 2003, annual revenues only fell three percent.