AMR's Quarterly Loss Narrows

Updated from 2:31 p.m. EDT

American Airlines parent AMR (AMR Quote) said its first-quarter loss narrowed by $70 million, and the carrier signaled that it will reduce summer capacity by placing 27 of its 327 inefficient MD-80s in storage by July.

The world's largest airline also said Tuesday that it has boosted round-trip domestic fares by $10 to partially compensate for higher fuel costs.

"Strong demand and reduced capacity have allowed us to raise fares several times during the past year," CEO Gerard Arpey told reporters and analysts on a conference call, noting that bookings are ahead of last year's pace. "The fare increases we have taken have not driven away passengers."

The aircraft groundings will result in $2 million of savings this year and could extend to $50 million if they continue, said CFO Tom Horton. American will reduce domestic capacity by about 4% this year, but international capacity will increase by about the same amount. Arpey said American needs the MD-80s in the summer, when travel is heavy, but not during the rest of the year.

AMR's first-quarter loss fell to $92 million, or 49 cents a share, from $162 million, or $1 a share, in the same period a year ago. Analysts polled by Thomson Financial had expected AMR to lose 77 cents. Last year's results included a benefit of $69 million, or 43 cents a share, related to excise-tax refunds.

"A loss of any size is never satisfactory," Arpey said. "But it is somewhat gratifying to have improved our first-quarter results by $139 million year over year excluding last year's excise tax refunds, despite the company paying $349 million more for fuel."

The company had positive operating cash flow for the quarter and an operating profit of $115 million, up from $23 million in the same quarter of 2005.