American Airlines’ Pilot Protest Cuts 1st-Quarter Earnings
AMR Corp., parent of No. 2 U.S. carrier American Airlines, said first-quarter earnings will be about half of the average analyst forecast after last month’s pilot protest cost it $225 million.
AMR said it sees profit from operations at 30 cents to 35 cents a share, below the 65-cent average in a First Call Corp. survey. The estimates ranged from 35 cents to 80 cents. AMR had previously said the cost of the protest might exceed $150 million before tax.
Thousands of American pilots called in sick over an 11-day period last month, forcing cancellation of 6,600 flights, in a protest over the acquisition of Reno Air Inc.
AMR Chief Financial Officer Gerard Arpey said that even after the job action ended, some passengers were reluctant to book on American.
“The impact of the strike is clearly a lot larger than they were saying a couple weeks ago,” said Thomas Longman, an Arnhold & S. Bleichroeder analyst. “If the effect was that severe, they probably lost bookings in the second quarter as well, though likely not as much as this quarter.”
AMR, based in Fort Worth, Texas, released the news shortly after 4 p.m. New York time and its shares took an immediate hit in late trading. The stock, which was trading at about 59 at the bell, ended the day down 3 1/2 to 57 1/2.
The company earned a spilt-adjusted $1.62 a share in the year-earlier first quarter.
AMR is expected to earn $5.86 a share for 1999, based on the average First Call estimate, down from $7.44 last year.
AMR said the protest cost it $200 million to $225 million before taxes.
American’s Allied Pilots Assn. is demanding immediate raises for pilots of Reno Air, which AMR bought Dec. 23, and more pay for AMR pilots who will rise in seniority. Reno Air pilots earn about half the $150,000 yearly compensation of their American counterparts, who are concerned that work will shift to the lower-paid pilots.
The pilots went back to their jobs last month after the union was found in contempt of a return-to-work order.
AMR released the latest estimates as it announced that it will buy back an additional $500 million in common stock, boosting the program to a total of $2.6 billion in repurchases since 1997. The company also anticipates completing its current $500 million buyback program in the first quarter.
