* AMR reports adjusted $360 mln loss on fuel
* Delta reports loss, cites $800 mln rise in fuel costs
* Delta, AMR shares up as return to profit expected
(Recasts. Adds AMR results, background, analyst comment. Updates shares.)
By Bill Rigby and Kyle Peterson
NEW YORK/CHICAGO (Reuters) - Two of the largest U.S. airlines on Wednesday blamed record high fuel costs in July for quarterly losses, but both carriers took some comfort in an outlook improved by the recent decline in oil prices.
The results from American Airlines parent AMR Corp AMR.N and Delta Air Lines Inc (DAL.N) were the first posted by major airlines for the third quarter and set the tone for upcoming reports from other carriers that likely have been battered just as badly by the fuel cost spike.
Despite the losses, the results showed surprising resilience by an industry that six months ago seemed poised for consolidation or bankruptcies. Nevertheless, storm clouds linger in the form of pervasive economic weakness and its potential to erode travel budgets.
“It is a start that yields have increased and capacity cuts will continue,” Basili Alukos, equity analyst at Morningstar said, referring to higher fares and airline downsizing.
“The big uncertainty becomes what’s going to happen in the next quarter or the next two quarters. Are (travelers) going to stop flying altogether?”
AMR shares rose 1.3 percent to $8.90 on the New York Stock Exchange, while Delta shares rose 4.1 percent to $7.65, in a falling market, as declining oil prices promised a return to profit next year. Crude oil CLc1 — down more than 45 percent from its July peak — fell $3.32 to $75.31 on Wednesday.
“Fuel dropping like a rock is a big offset to the economy,” Delta Chief Executive Richard Anderson said on a conference call with analysts.
He added that Delta was “well-positioned to weather the turmoil in the market,” and did not need to tap tight credit markets in the near future to fund aircraft deliveries.
AMR CEO Gerard Arpey offered a somewhat more cautious assessment in a statement.
“While fuel prices have fallen from record high levels a few months ago, the economic uncertainty, and what that might mean for travel demand, is a serious concern,” he said.
Airlines have worked to offset their fuel bills with capacity cuts designed to lower costs to boost fares.
AMR has said it plans to cut domestic capacity by as much as 12 percent this year. Delta plans to cut domestic capacity 13 percent in the second half of 2008. In March, Delta said it would cut 2,000 jobs.
AMR said its third-quarter net profit amounted to $45 million, or 17 cents per share, compared with a profit of $175 million, or 61 cents per share, in the third quarter of 2007.
Excluding the sale of American Beacon Advisors and other items, AMR said it lost $360 million, or $1.39 per share, compared with forecasts for a loss of $1.36 per share, according to Reuters Estimates.
AMR said it saw a $432 million gain from the sale of American Beacon Advisors.
The company reported revenue of $6.4 billion, an 8 percent gain over the year-ago period. AMR ended the quarter with $5.1 billion in cash and short-term investments, including a restricted balance of $456 million.
AMR said it expects its mainline capacity to fall 8.3 percent in the fourth quarter. Domestic capacity is expected to decline 12.5 percent and international capacity is expected to decline 0.6 percent, the company said.
AMR also said on Wednesday it would buy 42 Boeing Co (BA.N) 787 Dreamliners, worth more than $8 billion at list prices.
Delta, which is buying Northwest Airlines Corp NWA.N to form the world’s largest airline by traffic, reported a quarterly net loss of $50 million, or 13 cents per share, compared with a profit of $220 million, or 56 cents per share, a year earlier.
Excluding charges related to terminating contracts and the Northwest merger, it reported a loss of 7 cents per share. That was wider than the 2-cent per share loss expected by Wall Street, according to Reuters Estimates.
Delta increased operating revenue 9 percent to $5.7 billion, even though it reduced its flying capacity in the quarter, helped by strong trans-Atlantic business, higher fares and more fees. But the airline’s operating costs increased $814 million, or 17 percent, almost entirely due to higher fuel.
For the full year, Delta expects passenger unit revenue to rise 7 to 9 percent as it cuts flights and raises fares. It is expecting domestic capacity to fall 8 to 10 percent for the year, and capacity on its more lucrative international routes to rise 14 to 16 percent.
Reporting by Bill Rigby and Kyle Peterson, editing by Dave Zimmerman and Gerald E. McCormick