The AMEX airline index plunges to the lowest point in its 13-year history due to record-high oil prices.
By Aaron Smith, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- The already roughed-up airline industry nosedived on Friday as companies and their investors got slammed by high oil prices.
The AMEX Airline Index plunged to the lowest point in its 13-year history, dropping at one point on Friday by more than 7% to 13.7 points. That's 69% below its level in January 1995, when the index ( XAL) - a composite of U.S.-based and overseas carriers - was created.
UAL Corp. ( UAUA, Fortune 500), owner of United Airlines, lead the downturn with a 15% plunge in its stock price, after announcing a charge of $2.6 billion to $2.7 billion, partly from the cost of cutting 2,550 jobs. The stock closed on Friday off its lows at $3.63, down nearly 13%.
Cutting capacity.
Harlan Platt, a finance professor at Northeastern University's College of Business Administration in Boston, said he believes that some carriers won't survive another 18 months if oil prices don't ease. He said airlines should cut capacity by one-third.
"If everybody cut capacity by a third now and got rid of all unprofitable flights, the airlines would dramatically increase their survival time at these oil prices," said Platt.
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