Analyst: Oil's drop could return airlines to profitability

In May, American Airlines' chief executive, Gerard Arpey, called the run-up in jet fuel prices a "game changer" for the airline industry, and said it had spurred his plans to downsize the airline in the fall and begin charging customers a host of new fees.

Now one analyst is suggesting that the industry's outlook might improve after a recent drop in crude-oil prices.

"The recent oil price move to $115, if sustained, is a game-changing event for the industry," William Greene of Morgan Stanley wrote in a report Monday. Greene said that the airlines now have "substantial breathing room even if demand does weaken."

Greene predicts that if current oil prices are sustained, four major carriers — Delta, Northwest, United and Continental — will return to profitability next year. And although he still predicts a 2009 loss for AMR Corp., the Fort Worth-based parent of American, Greene has sharply decreased the amount he expects the carrier to lose, from $8.35 a share to $4.29.

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