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Airline shares mostly slip

1-Apr-2008

New York (AP) - Airline stocks mostly slipped Monday as oil prices rose and Aloha Airlines was forced to halt passenger service, becoming the latest casualty of fierce competition and surging fuel costs.

The Amex Airline Index dropped 1.2 percent as light, sweet crude for May delivery gained 28 cents to $105.90 a barrel on the New York Mercantile Exchange. Fuel is one of the airline industry's top costs.

Aloha, which filed for bankruptcy for Chapter 11 bankruptcy protection on March 20, said it will stop taking reservations for flights after Monday.

Aloha has suffered since Phoenix-based Mesa Air Group Inc. launched a new inter-island carrier called go! airlines in 2006, triggering a local airfare war. Hawaiian Airlines and go! stand to benefit most from Aloha's discontinuation of service.

Mesa shares rose 2 cents to $2.39 in morning trading.

Calyon Securities analyst Ray Neidl said that the U.S. airline industry stands to lose over $1 billion this year because of weak revenue growth and surging costs.

If economic weakness and high costs continue, "all the airlines would survive 2008 but cash levels would be at alarming levels for a majority of carriers," Neidl wrote in a note Monday.

He said Delta Air Lines Inc. and Northwest Airlines Corp. are best positioned to weather the storm because of progress made during restructuring, and Southwest Airlines Co. due to its low leverage and exceptional fuel hedging.

Delta shares dropped 16 cents to $8.45 as Northwest added 6 cents to $8.82. Southwest gained 27 cents, or 2.2 percent, to $12.30.

Elsewhere in the sector, Continental Airlines Inc. fell 30 cents to $18.78; American Airlines parent AMR Corp. fell 6 cents to $8.69; and United Airlines parent UAL Corp. dropped 14 cents to $21.05.


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