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Airline results take a hit from higher fuel cost

US airline earnings are down as they cope with rising fuel costs and a drop in the number of passengers traveling to Japan

April 21, 2011

In this April 6, 2011 photo, a Southwest Airlines aircraft taxies at Philadelphia International Airport, in Philadelphia. By the thinnest of margins, Southwest Airlines Co. said Thursday, April 21, 2011, it made money in the first quarter despite higher fuel prices.

Joseph Kaczmarek / AP / File

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By CNBC.com with wires

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Skyrocketing fuel costs and disasters in Japan took a bite of out major U.S. airline earnings reported Thursday, but higher fares helped the carriers, including United Continental, meet or beat Wall Street forecasts.

United Continental, parent of United Airlines, posted a quarterly loss and said the decline in demand for travel to Japan following the March 11 earthquake and tsunami lowered its first-quarter passenger revenue by about $30 million.

Low-cost leader, Southwest Airlines, reported a lower quarterly profit on mounting fuel costs that have extended their gains into the second quarter.

"Revenue was up nicely, led mostly by higher ticket prices, while surging fuel costs erased almost all of the profitability," Morningstar analyst Basili Alukos said.

A series of fare increases throughout the airline industry in the first quarter eased the pain of fuel prices that have soared alongside oil. The price of U.S. crude was around $111.00 a barrel on Thursday, having started the year at $91.31.

The Air Transport Association said last week that U.S. airlines may set a record for fuel costs when they report results, paying about $3 billion more so far this year.

"We're looking at fuel cost increases in the 40 percent to 50 percent range versus a year ago right now," Southwest Airlines CEO Gary Kelly told CNBC.

United Continental said the revenue gains it saw in the first quarter were offset by an increase in its fuel tab of 34.5 percent, or $725 million.

On Wednesday, American Airlines parent AMR posted a smaller-than-expected quarterly loss, but soaring fuel prices prompted the carrier to curb capacity later this year.

Delta Air Lines and US Airways were set to report earnings next week.

United Continental shares were down 1.3 percent at $20.74 in early trading, and Southwest's shares fell 1.4 percent, or 17 cents, to $11.46, both on the New York Stock Exchange.