Delta, Southwest warn about fuel, demand

Business Materials 4 December 2007 20:56 (UTC +04:00)

( Reuters ) - Waning consumer confidence and soaring fuel costs caused Delta Air Lines Inc (DAL.N) to warn of a possible operating loss on Tuesday, while Southwest Airlines Co (LUV.N) said it would restrict capacity growth to brace for tougher times ahead.

The latest signs that the U.S. airline industry is struggling to hold on to its fledgling recovery caused airline shares to fall.

In morning trade, the Amex airline index was down 1.8 percent, led by a 5 percent fall in Delta shares. Southwest fell 0.2 percent.

"We are concerned about growing evidence of slowing economic growth that would inevitably affect passenger demand, coupled with a surge in energy prices," Southwest Chief Executive Gary Kelly said in a statement.

The airline industry has been battered by overcapacity, which has made it hard for carriers to boost fares enough to cover the soaring cost of jet fuel. Top airlines have been cutting domestic capacity and raising fares this year to boost revenue.