The performance of the struggling US airline industry in August was far worse than analysts had expected, according to new figures that could spark another widening of loss estimates for the third quarter.

Figures released after the market closed on Wednesday by the Air Transport Association showed revenue per available seat mile, a key metric showing how much revenue airlines derive per seat, was down 3.7 per cent in August compared with a year ago. Analysts had been forecasting it either to be flat, or down just 1 per cent.

One analyst said far more worrying was the sequential change from July to August, typically two of the strongest months in the airline industry. It fell about 5 per cent month on month. “That is the worst July to August fall in a decade,” he said.

The weak ATA numbers were underlined by American, the world's largest airline, in a filing with the Securities and Exchange Commission. It warned: “August 2004 revenue was weaker than expected . . . As a result, third-quarter 2004 mainline unit revenue is expected to decline between 2.5 and 3.5 per cent year over year.”

American blamed “excess industry capacity, more frequent and more deeply discounted fare sales and the continued aggressive pricing and growth of low cost carriers. In addition, hurricanes adversely impacted both revenues and expenses in August and will impact September to an even greater degree.”

The ATA numbers show that fierce competition in the US domestic market is forcing down yields: August domestic RASM fell 6.5 per cent year over year the fourth consecutive monthly drop.

The news will put further pressure on airlines to cut costs. It also suggests that the airlines will have had less opportunity to shore up their cash reserves during August, before the seasonally weaker Christmas period. Indeed, American also warned for the first time that it might not be able to comply with one of its covenants on a bank facility at the end of September, and would also probably breach the covenant at December 31. To address this situation, it said that on September 22, it had amended the covenants on the bank facility but it remained “in active discussions to refinance its bank credit facility with one or more credit facilities or term loans in the fourth quarter of 2004 . . . While American believes that it will be able to obtain the replacement facility on acceptable terms, there can be no assurance that American will be able to do so.”

American's shares had closed down 3 per cent to $8.74 before it released its SEC filing.