Flying: Revolt Of The Executive Class

The fourth quarter of 1998 should have been a glorious one for the airline industry. Fuel costs fell 18% for the year, saving carriers some $2 billion. Debt is down, the resilient economy has kept planes fuller than ever, and fare wars seem a relic of days gone by.

Yet carrier after carrier spent the week of Jan. 18 preparing to announce fourth-quarter earnings declines--for a combined 36% industry fall, projects Salomon Smith Barney. Northwest Airlines suffered the most, with a quarterly loss of $181 million, a hangover from its summer pilots' strike. Despite picking up Northwest's lost business, though, the other major airlines reported weak earnings. Delta Air Lines Inc.'s, for example, were up 2%, while at AMR Corp., parent of American, they were down 13%. And this year doesn't look any better. Salomon expects first-quarter pretax earnings to fall 25%. The stocks have been punished accordingly, down 20% since July even as the S&P 500-stock index has risen 7%. For airline executives, who have made a habit of boasting that they have overcome the industry's violent cyclical swings, it is a nasty sight indeed.