US airline losses could top $2.2bn

AMERICAN airlines are reckoned to have lost $1.5bn (£850m) over the past three months in latest projections showing the fragility of any recovery in the travel market.

And, in what may bode ill for UK and European carriers as well, losses are expected to grow during the year as operations are hit by the high cost of kerosene and a price war with too many carriers fighting for too few passengers.

A report from top investment house Merrill Lynch reckons losses by US airlines for 2004 could top $2.2bn (£1.26bn).

'High fuel prices are masking the progress of cost reduction initiatives and the industry's bottom line has seen only a modest boost from improving revenue,' said Merrill analyst Michael Linenberg.

'Near-term concerns include persistently high fuel prices, terrorism fears and capacity 'creep'.'

He says the number of seats on offer from US carriers is close to the 2000 peak despite revenues in 2004 likely to be between 10% and 15% lower.

That has led to price war where one-way transcontinental fares have fallen to as low as $79, and Linenberg reckons carriers can be making only three cents per passenger

'No airline can make money at those levels,' he said.

Current losses forecast by Merrill are around half those posted for 2003 and Linenberg is pencilling in a recovery that could see the US industry as a whole making profits of $500m in 2005.