AMR Posts Record Loss in Quarter
Even though more people are flying again, the airline industry continued to reel Wednesday with American Airlines reporting a record loss and United Airlines’ chairman facing calls for his ouster.
AMR Corp., which owns Trans World Airlines in addition to American, said that in the three months ended Sept. 30 it lost $414 million, or $2.68 per diluted share, the worst quarterly loss in its history. Two of American’s jetliners were hijacked and used in the Sept. 11 terror attacks. A year ago, the carrier earned $313 million, or $1.91 a share.
The loss included various charges and gains, including severance costs related to job cuts announced late last month and the airline’s portion of the $5 billion in cash aid included in the federal bailout. AMR’s third-quarter revenue fell 8% to $4.8 billion from $5.3 billion.
AMR was forecast to have a third-quarter loss of $2.67 a share, the average estimate of analysts in a Thomson Financial/First Call poll. A loss was expected even before the attacks as companies cut travel budgets.
American and most other airlines slashed their operations by 15% to 20% to adapt to the plunge in passenger traffic that followed Sept. 11. Those cutbacks also prompted the industry to eliminate more than 100,000 airline jobs, and to obtain a $15-billion federal bailout.
Since then, a growing number of consumers have been flying again. The airlines’ average load factor last week--the percentage of their seats actually filled with passengers--was 67%, exactly where it was in the week prior to Sept. 11, according to the industry’s trade group, the Air Transport Assn.
But those figures are deceiving. Because the airlines have removed about 20% of their operations, that means 20% fewer people are actually flying compared with pre-Sept. 11 levels.
Indeed, the ATA said 7.6 million people traveled on domestic flights last week, down from 9 million the week before Sept. 11.
And most of the passengers who have come back also are leisure travelers taking advantage of the airlines’ discounted fares, and not the more lucrative business fliers. The result: Even with the bailout, the airlines continue to bleed cash because their costs for labor, aircraft and other items are still outpacing the revenues they’re collecting from passengers.
“This is an unprecedented financial crisis,” said AMR Chief Financial Officer Tom Horton in a teleconference announcing AMR’s results. He said the company still is losing between $10 million and $15 million a day, though that’s down from the losses American incurred right after the attacks.
United, whose parent UAL Corp. plans to report its third-quarter results Nov. 1, also is suffering enormous losses despite slashing its schedule by 26% and eliminating about 20,000 jobs. And that prompted its chairman, James Goodwin, to write a letter to employees last week that said the airline “will perish” sometime next year if it doesn’t quickly stem the losses.
The letter sparked an uproar among workers and their union leaders, who accused Goodwin of panicking United’s employees, customers and investors unjustifiably. Leaders of the unions representing United’s mechanics and flight attendants called for Goodwin to be ousted.
UAL directors met throughout the day Wednesday in Chicago. United spokesman Joe Hopkins would not discuss the board’s agenda, and said there was no news from the meeting as of late Wednesday.
A spokesman for the International Assn. of Machinists and Aerospace Workers expressed disappointment. “In this case, I can’t help but think no news is not good news for the employees,” said Frank Larkin.
The IAM represents 45,000 current and recently laid off United employees, including mechanics and passenger service representatives. Both employee groups have been in contract negotiations with the airline for two years. They are set to meet again with federal mediators later this month or in early November.
The union representing United flight attendants also has called for Goodwin’s removal, while the pilots union, which negotiated a lucrative contract last summer, has not taken a position. Both the pilots union and machinists union have seats on the UAL board.
American’s newest fare sale, meanwhile, is good for travel through March but the tickets must be purchased by Dec. 4, among other restrictions. The sale includes a $199 one-way fare from Los Angeles to New York, based on a round-trip purchase.
Other major carriers including United matched American’s sale, and United launched a sale on international flights through March, with tickets purchased by Monday. Both United and American offered additional savings for reservations made online, and boosted their frequent-flier mileage awards under the sales.
AMR slipped 25 cents a share, to $19.70, and UAL lost 65 cents a share, to $14.85, on the New York Stock Exchange.
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Times staff writer Nancy Cleeland contributed to this report.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Reeling Airlines
Travelers are returning to the skies in growing numbers, but the rebound is starting to level off and some airlines are warning of reduced bookings for the holiday season:
*--*
Passengers on domestic flights Load Week (in millions) factor* Oct. 15-21 7.6 67 % Oct. 8-14 7.5 67 Oct. 1-7 7.0 62 Sept. 24-30 6.0 52 Sept. 17-23 5.0 44 Sept. 10-16 N/A N/A Sept. 3-9 9.0 67**
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* Load factor is the percentage of available seats filled with passengers.
** Before industry slashed their schedules in response to Sept. 11.
N/A Not applicable due to two-day shutdown of U.S. air travel.
Source: Air Transport Assn.
