American Airlines parent AMR (NYSE: AMR) is freezing the hiring of management and support personnel. The move is a sign of distress at the carrier. It comes after Skybus, ATA, and Aloha Air have shut down.
According to The Dallas Morning News, a spokesman for AMR said, "I think it's no secret that the entire industry, including us, has been struggling to contain costs, mainly the cost of fuel." AMR may get an award for best understatement of the year.
According to the AMR 10-K, the company say it may be unable to raise money to retain sufficient liquidity. If fuel prices rise and passenger traffic drops due to the recession, that could become a real problem. AMR's operating income of $965 million in 2007 was tiny compared to its revenue of over $22.9 billion. Interest expense was over $900 million. The company has long-term debt of $9.4 billion.
Given how many large airlines have been through Chapter 11 during that last decade, AMR is not immune. It may not get through the year without a reorganization.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-06-2008 @ 12:34PM
jpkenneth said...
The airlines needs to do like the trucking industry does ,add a fuel sur-charge to each ticket.
4-06-2008 @ 12:56PM
jimmy said...
maybe the executives should stop taking big bonus while they give employees a one time $800 check
4-07-2008 @ 1:01PM
Ted said...
Perhaps the bean counters and other managers should try working the counter, baggage or a flight once in awhile. They are not only out of touch with their employees...they are woefully out of touch with their customers. "a nickel here...a change fee there...$5 for a pillow? Take a ride on Cathay and see how a "real" airline justifies the cost of a ticket.
4-08-2008 @ 10:39PM
penny said...
If AMR and American Airlines are in such dire financial straits, and they ARE, then on April 15 CEO Gerard Arpey and his board of directora and managers should do the prudent thing and decline to take their 'bonuses' and reinvest the over $500 million dollar profit back into the airline. AA once was a great airline but the last 10 years has seen CEO's who only care about saving their butt's and having an escape clause while looting the company of any profits earned by the front line employees. It's no wonder that company moral is at an all time low and service is non-exsistant, why try when your efforts are stolen right out from under you and justified as necessary to keep 'good' managers. Where have you gone Robert Crandall, we miss you!
4-09-2008 @ 10:46AM
Peter said...
AMR needs to rework their business plan to assume $100 a barrel for oil. The airline needs to massively lower costs which should start with a major rights offering of around $3bn with the use of proceeds to pay down high cost debt, offer buyouts for high cost employees (excluding pilots and mechanics) and more rapidly procure more fuel efficient aircraft. (I am not sure the current management has the credibility with investors that would allow them to raise this much money, perhaps new managment from outside the airline business, ie. Fedex, UPS, see below). AMR has kind of missed the boat on the international expansion which their competitors have been doing to gain access to more lucritive fares but they nonetheless should make a big push internationally. Revenue areas that the company should focus on are: fuel surcharge, food and beverage, baggage, freight and package shipment. These are already revenue areas but they need to sharpen their pencil.