AMR Corp., parent of American Airlines, posted a third quarter loss, excluding items, but also said it will order 42 next-generation planes from Boeing -- signaling that cost-cuts and increased efficiency may very well position the carrier for better quarters ahead.
AMR Corp (NYSE: AMR) reported a Q3 earnings per share of a loss of $1.39, excluding one-time items.
Analysts surveyed by Reuters had expected AMR to report a Q3 earnings per share loss of $1.36. AMR posted Q3 revenue of $6.4 billion. AMR's shares rose 60 cents to $9.38 in Thursday morning trading.
A cautious stance, given sector headwinds
As with other airlines, AMR blamed high fuel costs for the loss, but took some comfort, given that oil prices have declined about 50% in the past four months. Still, AMR C.E.O. Gerard Arpey remained cautious, given other headwinds affecting the airline sector.
"While fuel prices have fallen from record high levels a few months ago, the economic uncertainty, and what that might mean for travel demand, is a serious concern," Arpey said, in a statement.
In conjunction with the cautious outlook, AMR said it plans to cut domestic capacity by up to 12% this year. Meanwhile, international capacity will be cut just 0.6%.
Orders 42 Boeing 787 Dreamliners
On the decidedly bright side, AMR said it will buy 42 The Boeing Company (NYSE: BA) 787 Dreamliners, worth more than $8 billion at list prices, starting in 2012 and extending through 2018. The order is subject to AMR reaching an agreement with it pilots to fly the new aircraft. Further, AMR has an option to buy an additional 58 Dreamliners in the 2015-2020 period. When it debuts, the 787 will become the world's most fuel-efficient, commercial airplane.
Stock Analyst C. Leonard Bauer said while the U.S. airline sector is still characterized by too many carriers, AMR is positioning itself to be among those standing, when the U.S. economy starts to recover.
"AMR continues to eliminate unprofitable flights, look for ways to increase efficiency, and ways to do more with less," Bauer said. "Those operational characteristics, combined with lower fuel costs, will help offset lower revenue stemming from the slowing U.S. economy." Bauer added that he does not have a rating or own shares in any airline.
"If oil prices can stay in the $70-90 range through the end of 2009, and there's a decent chance they will, that will lower airlines' fuel costs by at least 30-40%, greatly assisting carriers like AMR," Bauer said. "No matter how efficient you are with routes and flight schedules, it's awful hard to run an airline with fuel costs rising by 40% or 50% a year."
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Reader Comments (Page 1 of 1)
10-16-2008 @ 7:42PM
woody said...
American can go out of business. Oil at 50% lower per barrel is only 30-40% savings. What kind of math are they using ?
Oh! That's right. The go screw yourselves math method.
How come Southwest was the only airline to hedge their oil supply saving tons of money for EVERYONE?
Answer: It's a better airline.
CHOKE ON YOUR FEES AMERICAN!!!