AMR Misses Estimates as Fuel Costs Rise

DALLAS TheStreet) -- American Airlines parent AMR ( AMR) missed earnings estimates as higher fuel prices resulted in $653 million in added third-quarter expenses.

The first airline to report third-quarter results said it lost $162 million, or 48 cents a share, in the quarter. Analysts surveyed by Thomson Reuters had estimated a loss of 42 cents. Revenue rose 9.1% to $6.4 billion, in line with estimates.

In the same quarter a year earlier, American earned $143 million, or 39 cents a share.

The company said fuel prices rose 41% in the quarter, resulting in fuel costs that were $653 million higher than they would have been had prices remained the same as the third quarter of 2010.

Additionally, American attributed a loss of $50 million, or 15 cents a share, to a combination of volatility in both West Texas intermediate crude oil prices and foreign exchange rates. The decrease in WTI prices, even as jet fuel prices remained high, resulted in a non-cash loss related to fuel hedging. Additionally, the carrier incurred a foreign exchange loss.

In a prepared statement, CEO Gerard Arpey said American is "taking aggressive actions to improve the company's performance and strengthen its foundation for long-term success." Already, the carrier has bolstered its network and alliances and announced the biggest aircraft order in history. It has moved to reduce fourth-quarter mainline capacity by 3%, compared with a year earlier, even though advance bookings are generally in line with last year.

" At this point, our immediate top priority is to address the key remaining foundational issue, which is our cost structure, so that we can change the competitive dynamics and move our company forward on the path to profitability," Arpey said.

During the quarter, consolidated passenger revenue per available seat mile rose 8.7%, while mainline PRASM grew 8.1%. Latin American PRASM rose 20% while South America PRASM rose 25%.

On the cost side, mainline cost excluding fuel rose 3.9%, which "reflects the impacts of unit cost headwinds associated with lower than planned 2011 capacity, as well as higher aircraft rent and expenses associated with higher revenues," the carrier said.

Looking ahead, American said cost per available seat mile is expected to increase between 6.2% and 6.6% in the fourth quarter, reflecting capacity reductions as well as higher aircraft rent and higher revenue related costs. For the full year 2011, CASM excluding fuel is expected to increase between 2% and 3%.

As of Sept. 30, American had $4.8 billion in cash and short-term investments, including a restricted balance of $474 million. A year earlier, American had $5 billion in cash and short-term investments including a restricted balance of $447 million. Net debt, or total debt less unrestricted cash and short-term investments, was $12.6 billion on Sept. 30, compared with $11.6 billion a year earlier.

-- Written by Ted Reed in Charlotte, N.C.

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