American Airlines parent AMR posts 2Q loss

DALLAS - American Airlines parent AMR Corp. lost more money in the second quarter as fewer people got on its planes and those who did paid lower fares than a year ago.

AMR's revenue plunged 21 percent from the same period in 2008, swamping the savings that American reaped from cheaper jet fuel prices.

Still, American raised more money from extra fees on baggage and other items, and the financial results weren't as bad as Wall Street had feared.

AMR said Wednesday that it lost $390 million, or $1.39 per share. Excluding charges related to the sale and grounding of planes, it would have lost $319 million, or $1.14 per share.

That was a narrower loss than expected. Analysts surveyed by Thomson Reuters had predicted a loss excluding charges of $1.28 per share.

In the same quarter last year, AMR lost $1.46 billion, or $5.83 per share, mostly for writing down the value of its fleet. Without the charges, the year-ago loss was $298 million.

Revenue in April through June fell to $4.89 billion, a decline of nearly $1.3 billion from a year ago.

The revenue slide is likely to continue into the fall. AMR officials said bookings through September are running about 1.5 percent of available seats behind last year's pace — especially troubling because American has cut the supply of seats.

On the positive side, Chief Financial Officer Tom Horton said, business travel "seems to have leveled off" after a sharp drop late last year and early this year. But it remains "sharply lower" than 12 months ago, although he declined to provide figures.

AMR shares rose 18 cents, or 4.3 percent, to close at $4.36.

Fort Worth-based AMR was the first major U.S. airline to report results for the second quarter, usually a good one for travel. But many companies have reduced travel due to the recession, and that's hurting the airlines.

"The challenges for our industry and company have continued throughout 2009," said Chairman and CEO Gerard Arpey.

Arpey pointed to the global economic slump and its effect on travel demand and oil prices that have been rising lately, pushing up the cost of jet fuel.

Still, oil prices are far below the record levels of last summer. In the just-concluded quarter, AMR spent 45 percent less on fuel than it did a year ago, a savings of nearly $1.1 billion.

Traffic on American dropped 8.2 percent in the second quarter, with officials blaming the swine flu outbreak for $50 million to $80 million in lost revenue.

Not only are fewer passengers traveling, but they're less likely to buy high-priced tickets. That's due to the downturn in business travel and a spate of fare sales launched by carriers eager to fill empty seats.

As a result, American's average fare in the second quarter fell 15.4 percent from a year ago.

Some analysts thought American's pricing power would be even weaker. Hunter Keay of Stifel, Nicolaus & Co. said American scored "a little bit of a beat on the revenue side," allowing it to report a smaller-than-expected loss for the quarter.

American tried to make up for fewer passengers in other ways. Ancillary revenue such as fees for checking luggage and buying food on board rose 7.4 percent to $565 million in the second quarter.

It also canceled many unprofitable flights, which reduced capacity by 7.6 percent from a year earlier. Airlines can reduce capacity — or the number of seats in the air — by cutting flights or using smaller planes.

American expects capacity in the third quarter to be 8.5 percent lower than last summer, with a 10.5 percent reduction in the U.S.

Analysts regard AMR as financially weaker than many of its major rivals, with some rating it the third most vulnerable to a liquidity crisis behind only US Airways Group Inc. and United parent UAL Corp.

AMR is shoring up its balance sheet, and said Wednesday it had raised $66 million by selling and leasing back several aircraft and arranged to limit to $300 million the amount that one of its credit card processors can hold back from tickets that customers charge.

The company also said that with its financing moves, including completion of a $520 million offering, it can press ahead with an ambitious fleet upgrade. AMR said it could now finance all 84 Boeing 737 jets it expects to add through 2011 — it previously had arrangements only into late next year.

AMR said it ended the second quarter with more than $2.8 billion in unrestricted cash and short-term investments, down sharply from an unrestricted balance of nearly $5.1 billion a year ago.

Airlines are hoarding cash to last through what is expected to be a very slow fall and winter season.

CEO Arpey was asked how long airlines could go on losing money before they'd be forced into bankruptcy protection.

"Not forever," he replied.

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