AMR first-quarter loss rises to $505 million on higher fuel prices, weak economy
Thursday April 22, 2010
American Airlines parent AMR Corp. reported what executives called a "disappointing" first-quarter net loss of $505 million, sharply higher than a loss of $375 million in the year-ago quarter.

Results for the quarter included the impact of a $53 million special charge related to devaluation of the Venezuelan currency in January, while 2009 first-quarter results were net of a $13 million charge related to A300 retirements. Excluding both items, the 2010 loss widened to $452 million from $362 million last year.

The result contrasted with a general trend of improving financial performance at other US airlines. "As the results show, the first quarter proved to be quite challenging for our company. Lingering weakness in the economy, rising fuel prices and cost pressures mainly resulting from capacity cuts combined to produce a disappointing result," Executive VP-Finance and Planning and CFO Tom Horton said during the company's quarterly webcast with analysts. He noted that although AA is seeing "positive signs that corporate travelers are back on the road and our revenues and our unit revenues have nearly returned to early 2008 levels, high fuel prices and increasing costs overshadowed our progress."

Horton also said AA had cancelled approximately 350 transatlantic flights through Tuesday owing to the closure of European airspace, resulting in an estimated loss of around $15 million in the second quarter.

Operating revenue for the first quarter rose 4.7% to $5.07 billion but operating expenses climbed 6.6%, mostly driven by a 13.7% jump in fuel costs to $5.37 billion. Operating loss deepened to $298 million from $194 million in the year-earlier period.

Mainline traffic rose just 0.4% to 28.7 billion RPMs as capacity dipped 2.5% to 36.85 billion ASMs, boosting load factor 2.2 points to 77.9%. AA estimated that inclement weather and the earthquakes in Haiti and Chile reduced revenue by $20-$25 million. Yield rose 3.7% to 13.35 cents while RASM surged 6.8% to 10.4 cents. Unit costs grew faster, however, with mainline CASM up 8.3% to 12.76 cents excluding special items. CASM excluding fuel and special items lifted 5.7% to 9.15 cents.

AMR has hedged 39% of its anticipated second-quarter fuel consumption at an average cap of $2.47 per gal. ($95 per barrel crude equivalent) with 38% subject to an average floor of $1.89. Average cost in the first quarter was $2.22 per gal.

The company expects full-year mainline capacity to rise 1% compared to 2009, with domestic capacity down 0.2% and international up 3%. Including regional subsidiary American Eagle Airlines, full-year capacity will grow 1.5%. Nonfuel CASM is forecast to rise 1.5% for the full year.