AMR Loses $85 Million in Quarter : Airlines: American’s parent is stung by the massive fare war during summer travel season.
In a graphic example of the summer fare war’s toll on the airline industry, American Airlines’ parent on Wednesday posted an $85-million loss for the third quarter, normally one of the strongest travel periods of the year.
News of the loss, which was slightly above analysts’ projections, comes a week after Dallas-based AMR Corp. said it would cut $300 million in costs by laying off up to 1,000 managers.
It serves as the final knell for American’s simplified fair structure, which the carrier introduced in April to spur business travel, but which triggered the massive air fare war during the peak summer travel season. American has discontinued the four-tier structure and AMR Chairman Robert L. Crandall has acknowledged its failure.
Despite the bad news, AMR’s stock jumped $1.875 a share Wednesday on the New York Stock Exchange to close at $62.875, signaling that Wall Street foresees better times ahead for American Airlines and the industry.
“If conditions get bad enough, they can only go one way, and that is the juncture that we’ve reached in the fourth quarter,” said Samuel C. Buttrick, an airline analyst with Kidder, Peabody & Co.
Crandall called industry leader American’s performance “very unsatisfactory,” blaming the summer half-price fare sale, the damage to the carrier’s Miami hub caused by Hurricane Andrew and the fact that American grew faster than its competitors because of previously scheduled aircraft deliveries.
“We are very disappointed by our results, particularly because our revenue performance will undoubtedly compare very unfavorably to that of other airlines,” Crandall said in a statement. Other airlines will look better because they did not sell as many low-cost seats as American did, he said.
Crandall said that as the sale gained momentum, most other carriers withheld more and more sale seats from customers and instead added higher fares. “As the creator of the (low-fare) plan, we felt it would be inappropriate and misleading for us to use these . . . techniques,” he said.
The third-quarter loss, which worked out to $1.13 a share, contrasted with net earnings of $70 million, or $1.02 a share, in the same quarter last year, and a loss of $166 million in the second quarter of 1992, which included $109 million in non-recurring charges. Third-quarter revenue increased nearly 6% to $3.73 billion. Analysts expect AMR to post a loss for the year, which would be its third in a row.
Speaking at a telephone news conference, AMR Chief Financial Officer Michael J. Durham said that fares have increased, which “should allow us to see some measure of profitability in 1993.”
Although yields--the average amount a passenger pays to fly one mile--have improved, Durham stopped short of predicting black ink for the rest of the year because of the volatility of airline ticket prices. “It does not get us to the point where we can forecast a profit yet for the fourth quarter,” he said.
Durham added that the company has no plans to lay off pilots, as Delta announced on Tuesday it would do.
