AMR Corp. Q1 2010 Earnings Call Transcript

AMR Corp. Q1 2010 Earnings Call Transcript
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AMR Corp. (AMR)

Q1 2010 Earnings Call

April 21, 2010 2:00 pm ET

Executives

Chris Ducey - Managing Director of Investor Relations

Gerard Arpey - President & Chief Executive Officer

Tom Horton - Chief Financial Officer

Analysts

Hunter Keay - Stifel Nicolaus

Jamie Baker - JP Morgan

Gary Chase - Barclays Capital

Bill Green – Morgan Stanley

Helane Becker - Jesup & Lamont

Kevin Crissey - UBS

Will Randow - Citi

Bill Mastoris - Broadpoint Capital

Dan McKenzie – Hudson Securities

P

resentation

Operator

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Welcome to the AMR first quarter 2010 earnings conference call. (Operator Instructions) As a note, will be taking questions first from the members of the analyst community and then after a short break, move into our media Q-and-A session. As a reminder, today’s call is being recorded. We are very pleased to have on the call with us today AMR’s Chairman and Chief Executive Officer, Mr. Gerard Arpey; and Executive Vice President of Finance and Planning and Chief Financial Officer, Tom Horton.

Here with our opening remarks is AMR’s Managing Director of Investor Relations, Chris Ducey. Please go ahead sir.

Chris Ducey

Good afternoon everyone. Thank you for joining us on today’s AMR earnings call. During the call Gerard Arpey will provide an overview of our performance and outlook and then Tom Horton will provide details regarding our earnings for the first quarter along with some perspective on the second quarter and the remainder of 2010. After that we will be happy to take your questions. In the interest of time, please limit your questions to one with a follow-up.

Our earnings release earlier today contains highlights of our financial results for the quarter. This release continues to provide additional information regarding entity performance and cost guidance which should assist you in having accurate information about our performance and outlook. In addition, the earnings release contains reconciliations of any non-GAAP financial measurements that we may discuss. This release, along with the webcast of today’s call, is available on the Investor Relations section of

www.aa.com

.

Finally, let me note that many of our comments today including statements regarding our outlook for revenue and costs, forecasts of capacity, traffic load factor, fuel costs, fleet plans and statements regarding our plans and expectations will constitute forward-looking statements. These matters are subject to a number of factors that could cause actual results to differ from our expectations.

These factors include changes in economic, business and financial conditions, high fuel prices and other factors referred to in our SEC filings including our 2009 Annual Report on Form 10-K.

With that I will turn the call over to Gerard.

Gerard Arpey

Thank you Chris, good afternoon everyone. As you have seen in our press release excluding special items we had a net loss of $452 million for the first quarter which compares to a net loss of $362 million a year ago. It was obviously a disappointing result as higher fuel prices largely outpaced the progress we made in generating nearly $230 million of additional revenue.

In spite of the short-term challenges we faced in the first quarter which Tom will walk you through in a few moments, we did make some important long-term progress on a number of fronts. On our last earnings call we shared our framework for the next decade which we call internally Flight Plan 2020 and it is intended to set the foundation of making this decade one of success and not just of survival. Its five tenets are; Invest wisely, earn customer loyalty, strengthen and defend our global network, be a good place for good people and fly profitably. These are the principles that will guide our company over the coming years.

The revenue generating power of our network is critical to our future and in the first three months of this year we were able to strengthen our global network as JAL reaffirmed its commitment to American and oneworld and together we are moving forward with our application for antitrust immunity. At the same time, we think government regulators on both sides of the ocean are poised to finally approve our joint business agreement with British Airways and Iberia.

Also we announced plans to significantly strengthen our presence in New York through a number of steps including an innovative partnership with JetBlue. In addition, this month we have started implementing our cornerstone strategy bolstering our flying in New York, Los Angeles, Chicago, and Dallas/Fort Worth, the four largest business markets in the United States and in Miami, the hub of the Americas. We believe these network initiatives build the revenue generating power of the best network in the airline industry and position us well for the future all without jeopardizing our long track record of capacity discipline.

As Tom will discuss while there are signs of a recovery in demand the last thing we can afford to do is get ahead of ourselves with supply and our capacity plans for this year remain modest. Our 1% mainline capacity increase in 2010 is driven by the launch of service to Beijing, China and the reinstatement of flying cancelled during last year due to the H1N1 virus. While we are keeping a lid on capacity at the same time our fleet renewal program is picking up speed. We are taking delivery of a lot of 737-800’s which are a lot more fuel efficient than the MD-80’s they are replacing. We are also adding more CRJ-700’s with first class seats and installing first class on our existing CRJs.

We ended the first quarter with a strong cash balance of just over $5 billion. That is $1.7 billion more than our total cash balance at this time last year and that increase reflects both the financing transactions we executed last year to bolster our liquidity as well as an improving revenue environment this year. Even though we are seeing some positive signs we along with the entire industry continue to face a host of uncertainties regarding the broader economy and fuel prices but macro uncertainty is certainly nothing new and we remain committed to working hard to return our company to profitability.

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