AMR’s Cost Cuts Narrow Net Loss
American Airlines parent AMR Corp., the world’s largest carrier, said Wednesday that its second-quarter loss narrowed as cuts in jobs, pay and flights whittled down costs.
AMR reduced its net loss to $75 million, or 47 cents a share, from $495 million, or $3.19, in the same period a year ago. This year’s results were helped by a $358-million payment from the U.S. to help offset losses related to the Iraq war.
Chief Executive Gerard Arpey averted bankruptcy in April by securing labor concessions to meet AMR’s target for $4 billion in annual savings. About 2,000 more jobs will be eliminated as AMR cuts flights from its St. Louis hub by half and closes a reservations office there, said Tim Wagner, a spokesman.
Shares of AMR rose $1.10, or 10%, to $11.66 in New York Stock Exchange trading. The stock has risen 77% this year after falling as low as $1.41 in March as the company threatened to seek bankruptcy protection unless workers agreed to help lower labor costs.
Airlines have been slashing costs as terrorism, war and a deadly virus added to losses. The 10 largest U.S. carriers are expected to lose $1.45 billion this quarter, according to UBS Warburg.
AMR will decide later this year on cuts at its three repair facilities in Fort Worth; Tulsa, Okla.; and Kansas City, Mo.
Without the government aid and excluding costs of $47 million for employee severance and $29 million tied to closing facilities and grounding aircraft, AMR had a loss of $357 million, or $2.26 a share, in the quarter. Sales fell 4.1% to $4.32 billion.
“By no means is this company out of the woods yet,” said Ray Neidl, a Blaylock & Partners analyst. “They may have a marginally profitable July and August, but post Labor Day I think they’re expecting losses to come in again.”
Neidl said he didn’t expect AMR to be profitable until at least the third quarter of 2004. He said there’s less than a 20% chance AMR still may file for bankruptcy protection. Neidl has a “hold” rating on AMR stock, meaning it is considered a long-term investment and aggressive buying isn’t advised.
The job eliminations in St. Louis announced Wednesday will bring total layoffs at American since Sept. 11, 2001, to 25,000.
The reservation office will close Sept. 15, with the airport reductions effective Nov. 1.
