Q3 2011 Earnings Call

October 19, 2011 2:00 pm ET


Thomas Horton - President and President of American Airlines Inc

Isabella D. Goren - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Christopher Ducey - Managing Director of Investor Relations

Gerard Arpey - Chairman and Chief Executive Officer


William J. Greene - Morgan Stanley, Research Division

Helane Becker - Dahlman Rose & Company, LLC, Research Division

Kevin Crissey - UBS Investment Bank, Research Division

Hunter K. Keay - Wolfe Trahan & Co.

Garrett L. Chase - Barclays Capital, Research Division

Michael Linenberg - Deutsche Bank AG, Research Division

Jamie N. Baker - JP Morgan Chase & Co, Research Division

James M. Higgins - Ticonderoga Securities LLC, Research Division

Glenn D. Engel - BofA Merrill Lynch, Research Division

Daniel McKenzie - Rodman & Renshaw, LLC, Research Division

Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division



Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the AMR Third Quarter 2011 Earnings Conference Call. [Operator Instructions] 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, Gerard Arpey; the President of AMR and American Airlines, Tom Horton; and Senior Vice President and Chief Financial Officer, Bella Goren. And here with our opening remarks is AMR's Managing Director of Investor Relations, Chris Ducey. Please go ahead, sir.

Christopher Ducey

Thank you. Good afternoon, everyone, and 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 Bella Goren will provide the details regarding our earnings for the second (sic) [third] quarter, along with some perspective on the quarter and the full year of 2011. After that, we'll be happy to take your questions. [Operator Instructions] 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 a webcast of today's call and supporting slides, are available on the Investor Relations section of

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 2010 annual report on Form 10-K and our most recent 10-Q.

And with that, I'll turn the call over to Gerard.

Gerard Arpey

Thank you, Chris. Good afternoon, everyone, and thank you for joining us on our call. Before we review our results for the quarter and the steps we have taken to improve our performance, I'd like to start by providing a brief overview of how I see the landscape at American Airlines, where we are now, actions we're taking to address near-term challenge and how we are positioning the company for the future.

As all of you know, the past decade has been enormously challenging for the industry and for American. During that time, we chose a different path than others, and our actions demonstrate that we have been fully commitment to that path. It's no secret, however, that the court restructuring process used by our competitors to restructure their labor contracts and thus lower their operating costs has intensified our competitive challenge.

To confront this fact, over the past couple of years, we have been moving forward to take the necessary steps to create a successful enterprise that will be competitive and profitable for the long term. Our powerful assets, which include one of the most recognized brands in any industry, our unmatched advantage program, our global network and alliances, our innovative approaches and the loyalty of our customers remained real competitive advantages. Furthermore, another powerful factor which pulls all of this together is our people, the finest in the industry. Capitalizing on these strengths, American can and will become a profitable company again.

Over the past couple of years, despite the challenges faced by the industry and the overall economic landscape, we have put in place building blocks, which when taken together, create a strong foundation for long-term success. Specifically, we have restructured our network to serve the most important business markets, and we will continue to enhance and maximize its revenue-generation potential. We implemented joint business agreements across both the Atlantic and the Pacific with premier partners, and we will continue to fortify our oneworld alliance by building comprehensive partnerships with the best international carriers in the most important regions of the world.

We are innovating and continually enhancing our customer experience across the board, from improving dependability to new technology to improved cabin environment and onboard services, in particular, for our premium customers. The Boeing and Airbus deals that we struck in July accelerated the fleet renewal efforts that were already underway here at American, with 737-800s replacing MD-80s, 777-300s entering the fleet starting next year and up to 100 787s just a bit further down the road. With a firm order of 460 narrowbody split 50-50 between current and next-generation technology aircraft, we will soon have a new and far more efficient narrowbody fleet which offers tangible customer, financial and operational benefits the day we begin taking delivery. We will significantly lower our fuel and maintenance costs and provide a different level of customer experience.

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