AMR Posts $575-Million Loss
American Airlines parent AMR Corp., highlighting the airline industry’s struggle to recover from 2001, on Wednesday posted a record $575-million loss for the first quarter and indicated its second-quarter loss would well exceed Wall Street’s expectations.
The world’s largest carrier, still trying to rebound from the effect of last year’s recession and terrorist attacks, continues to grapple with the soft U.S. economy, weak passenger traffic and lower average fares. Sluggish business travel, in particular, remains a key hurdle because it accounts for the majority of American’s income.
“We are making some progress,” Tom Horton, AMR’s chief financial officer, said in a conference call. But he added, “We are climbing out of a very, very deep hole.”
The loss narrowed from AMR’s $798-million deficit in last year’s fourth quarter, but was still a record first-quarter loss for the Fort Worth-based firm. The loss, equal to $3.71 per diluted share, included a $27-million charge related to a change in tax laws, compared with a net loss of $43 million, or 28 cents a share, in the first quarter of 2001.
Excluding the charge, AMR lost $548 million in the latest quarter, or $3.53 a share, a tad better than the $3.55-a-share loss expected by analysts surveyed by Thomson Financial/First Call. Analysts also had expected AMR to lose $1.06 a share in the second quarter, but Horton signaled that the loss could be much bigger even though passenger traffic is slowly rebounding.
The problem for American and the industry overall is that much of the increased travel is being stimulated by fare sales, so the added revenue isn’t offsetting the airlines’ costs. And some carriers’ recent efforts to raise fares failed when their rivals didn’t follow suit.
Indeed, American’s revenue yield--or average fare--dropped 16% in the first quarter compared with a year earlier. AMR’s overall first-quarter revenue fell 13% to $4.1 billion from $4.8 billion. (AMR’s year-earlier results don’t include the operations of Trans World Airlines, which AMR acquired in April 2001.)
The industry is expected to show first-quarter losses totaling more than $2 billion, and the major carriers aren’t expected to turn profitable until the second half of 2002, if then. Horton declined to predict when AMR would report quarterly earnings again.
“It will come; I just can’t tell you when,” he said.
American said some of its overseas markets also remain especially weak, including Europe and Latin America, where unrest in Venezuela and economic problems are depressing travel.
On the plus side, Horton said American hopes to add 3,000 more jobs by year’s end as it continues to gradually build back service. Immediately after Sept. 11, American slashed 20% of its operations and about 20,000 jobs, and so far has added back about 5,000 of those positions. Still, American’s operations will be about 11% below year-earlier levels when the current quarter ends, Horton said.
After the report, AMR’s stock fell 57 cents a share, to $23.65, on the New York Stock Exchange.
