AMR Posts Loss as Fuel Costs Surge - TheStreet

AMR Posts Loss as Fuel Costs Surge

Revenue rose 5.1% to $6.2 billion and slightly exceeded forecasts.
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A 53% increase in fuel costs led American Airlines parent



to a second-quarter loss and prompted a decision to speed up the retirement of its A300 fleet.

Excluding special charges, the world's largest airline lost $284 million, or $1.13 a share, in the quarter. Analysts surveyed by Thomson Reuters had estimated a loss of $1.40. Revenue rose 5.1% to $6.2 billion and slightly exceeded forecasts.

Including a $1.1 billion noncash accounting charge to write down aircraft and other assets to fair market value, along with $55 million in severance-related charges, the loss was $1.4 billion.

During the quarter, American paid $838 million more for fuel than it would have paid a year earlier. "Our company continues to be severely challenged by the fuel crisis that has afflicted our entire industry, and we expect these difficulties to continue for the foreseeable future," said CEO Gerard Arpey, in a prepared statement. The company said it will delay the divestiture of American Eagle until conditions are more favorable.

As of June 30, American had $5.5 billion in cash and short-term investments, including a restricted balance of $434 million. Moving to further bolster liquidity, it obtained $720 million in new financing, $500 million of which arrived in July. At the end of the first quarter, American had $4.9 billion in cash and short-term investments.

American also said it will hasten its retirement of 34 A300 aircraft, which will now be gone by the end of 2009, rather than in 2012. In 2008, retirements will include 30 MD-80s, 10 A300s and 26 turbo-prop aircraft. Additionally, 37 regional jets are leaving service. American expects delivery of 70 Boeing 737-800 aircraft in 2009 and 2010.

Mainline passenger revenue per available seat mile rose by 7%, while capacity fell by 2.2%. Cost per available seat mile, before items, was up 19.3%. Excluding fuel and special items, CASM rose 5.1%.

Looking ahead, full-year mainline capacity will fall by 3.4%, including a 5.7% cut in domestic capacity and a 0.7% increase in international capacity. System capacity will decrease by 3.7%. In the fourth quarter, mainline domestic capacity drops by 11% to 12% and system capacity by 7% to 8%.

American said it has hedged 35% of its fuel needs at $95 a barrel for the third quarter, and 34% of its requirements at $82 a barrel for the full year.