Fuel costs end AirTran's profit streak

Higher fuel costs drove AirTran Airways to a loss in the first quarter of the year, and the price of fuel represents the biggest risk as the airline industry recovers, the carrier's top executive said.

AirTran lost $12 million in the first quarter ended in March, or 9 cents per share, due to an increase in fuel costs and the impact of snowstorms. In the same quarter last year, AirTran had a profit of $28.7 million.

Last year, AirTran stood out in the airline industry for reporting profits. But higher fuel prices led to a $67.3 million increase in operating costs for the first quarter. In fact, the loss would have been wider excluding $4.7 million in unrealized gains on future fuel hedges.

. AirTran said it lost about $10 million in revenue due to the snowstorms that forced cancellations, and that it was particularly affected in Atlanta and Baltimore.

"It certainly is disappointing to have a first quarter loss after four consecutive quarters of profitability," said AirTran chief executive Bob Fornaro. But he added that the company sees significant revenue growth and stout passenger demand.

AirTran's first-quarter operating revenues were $605.1 million, up 11.7 percent year-over-year. Its operating costs grew 21.8 percent to $602.1 million. Other expenses, including interest expense, totaled $15.1 million. AirTran ended the first quarter with $534 million in unrestricted cash.

AirTran expects to grow its flight capacity by 4 percent in the current quarter ending in June, compared with a year earlier. In the third and fourth quarters, it projects capacity will be 2 percent above year-earlier periods.

Amid reports of merger talks between United and Continental, Fornaro said he does not plan to initiate talks, but "our position at AirTran is if someone took  a peek at AirTran.... our fiduciary responsibility is to take a look at it and make sure that we're looking out for our shareholders."

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