VOL. 127 | NO. 140 | Thursday, July 19, 2012
AMR has Q2 Loss of $241M on Bankruptcy Costs
DAVID KOENIG | AP Airlines Writer
DALLAS (AP) — American Airlines is reaping higher fares and record revenue but still losing money.
American's parent, AMR Corp., said Wednesday that it narrowed its second-quarter loss to $241 million from $286 million a year ago. The results were weighed down by the cost of AMR's bankruptcy restructuring.
AMR said that without those costs, it would have earned $95 million, its first operating profit for the early-summer quarter since 2007.
The report offered glimmers of hope for a turnaround at American, which has tried but failed to fix itself several times in the past decade.
AMR set a record for revenue in any quarter, $6.46 billion. The company said revenue was helped by an increase in corporate-travel accounts and its fare-sharing ventures with British Airways, Iberia and Japan Airlines.
Fares rose 7 percent over last summer. Even with higher ticket prices, American and regional affiliate American Eagle sold 85.1 percent of the seats on their planes, another company record.
CEO Thomas Horton called the second quarter "a time of exceptional improvement."
American and AMR filed for bankruptcy protection in November after losing more than $10 billion since 2001. The company is seeking to cut labor costs and shed money-losing routes to return to profitability while fending off unsolicited takeover advances from smaller rival US Airways Group Inc.
To control its own fate, AMR will have to prove to its bankruptcy creditors that it can do better on its own than it could if paired with US Airways. AMR executives said they are making a quick recovery under bankruptcy protection.
"This improvement reflects only a fraction of our ongoing restructuring progress," Horton said. "While there is still much to be done, we expect this momentum to build quickly as the new American re-emerges as an industry leader."
AMR has set a goal of cutting annual costs by $2 billion. Chief financial officer Bella Goren said AMR was "far along" in hitting that target in the future but that the effect on second-quarter spending was "very small." She declined to give figures.
The company expects more than half of its savings to come from cutting jobs and otherwise reducing spending on labor. Several groups of American Airlines ground workers have approved new contracts designed to cut labor costs. Pilots and mechanics will vote soon on similar deals, and American is still negotiating with flight attendants.
American also has used bankruptcy to get rid of some leased aircraft and is negotiating with aircraft lessors and suppliers for more savings.
Like other airlines, American caught a break when jet fuel prices began falling in April. AMR's fuel spending still increased over last year's second quarter, but by only 0.3 percent — not the double-digit increases of recent quarters. Labor costs rose 0.8 percent.
That helped AMR limit the increase in operating costs to 1.9 percent, well below the 5.5 percent gain in revenue.
The adjusted profit equaled 28 cents per share, beating the forecast of 22 cents per share among three analysts who responded to a survey by research firm FactSet. AMR's revenue fell about $20 million short of those analysts' prediction.
AMR reported $230 million in restructuring costs, which include fees paid to bankruptcy lawyers and other advisers, and $106 million in other charges, mostly future severance payments to executives, agents and ground workers who will lose their jobs. There are likely to be more such charges as AMR eliminates jobs of some flight attendants and mechanics.
AMR shares were removed from the New York Stock Exchange after the bankruptcy filing. They continue to trade over the counter but have fallen below $1 because companies in bankruptcy usually issue new stock after they go through the process.
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