American Airlines Lost $166 Million in Quarter

In a bleak indicator of the airline industry’s financial performance this year, American Airlines on Wednesday reported a second-quarter loss of $166 million.

The loss reflected the ravages of air fare discounting and the failure of a major computer reservations project. The dismal second-quarter performance by the nation’s largest carrier is expected to be mirrored by most other major carriers as they issue their quarterly reports.

“It looks like it could be another blood bath year for the industry,” airline consultant Ernest Arvai said. The industry as a whole lost more than $6 billion the two previous years.

The bulk of American’s second-quarter loss was related to a one-time, $109-million after-tax charge to cover potential losses from the development of a complex computer reservation system for hotels and auto rental companies. The development of the system--called CONFIRM--has been suspended in the face of substantial technical difficulties and the withdrawal of the partners in the project.

Excluding one-time charges, American’s loss for the quarter would have been $48 million. Last year, American posted a $10-million profit in the same quarter.

Dallas-based American had anticipated losses as a result of its simplified fare schedule, which cut fares for business travelers in hopes of stimulating traffic. But American was forced to cut fares further to match competitors, and, in late May, the carrier slashed vacation prices by 50%.

“Our operating results in the second quarter were very adversely affected by the need to match discounted fares of our competition, which were set below American’s new Value Pricing structure,” Chairman Robert L. Crandall said in a prepared statement.

While the airline lowered many fares, costs increased. Jet fuel, a major airline expense, rose 4 cents a gallon during the quarter.

In addition, American also reported a one-time charge of $9 million to settle a class-action, price-fixing lawsuit filed against the airline and several other major carriers.