Wednesday, July 16, 2008

Fort Worth-based American Airlines reports second-quarter 2008 loss

By Pegasus News wire

AMR Corporation, parent company of American Airlines, reported a net loss of $1.4 billion for the second quarter of 2008, or $5.77 per share.

Record jet fuel prices contributed significantly to the Company's loss in the second quarter of 2008. AMR paid $3.19 per gallon for jet fuel in the second quarter compared to $2.09 a gallon in the second quarter of 2007, a 53 percent increase. As a result, the Company paid $838 million more for fuel in the second quarter of 2008 than it would have paid at prevailing prices from the prior-year period.

The second quarter results include special charges (as previously disclosed in AMR's Form 8-K filing with the Securities and Exchange Commission on July 2): 1. a $1.1 billion non-cash accounting charge to write down the value of certain aircraft and related long-lived assets to their estimated fair value; and 2. a charge of approximately $55 million of a total $70 million expected for severance-related costs resulting from the Company's system-wide capacity reductions in the fourth quarter of this year. The remainder of the severance-related charge is expected to be taken in the third quarter. Excluding these special charges, AMR reported a second quarter net loss of $284 million, or $1.13 per share.

The current quarter results compare to a net profit of $317 million for the second quarter of 2007, or $1.08 per diluted share.

"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 AMR Chairman and CEO Gerard Arpey. "Clearly, our second quarter results were disappointing, but I am also pleased with our efforts as a company to take difficult yet necessary steps to manage through this uncertainty. While we believe the airline industry cannot continue, in its current form, at today's record fuel prices, we also believe our decisions and hard work by employees in recent years have better prepared us to face these challenges. We remain committed to taking action -- whether that relates to capacity reductions, revenue enhancements, fleet changes or other efforts to improve our financial foundation -- as we work to secure our long-term future."

AMR highlighted additional actions it has taken in response to the ongoing challenges of record fuel prices and a softer economy. The Company has obtained $720 million in new financing through a number of transactions, including the sale of certain aircraft that will remain in the Company's fleet through a lease agreement, and through newly issued mortgage debt that is secured by aircraft. Of the new financing, approximately $500 million was received in July and will be recorded in the Company's cash balance in the third quarter of 2008.

In addition, AMR has decided to retire all 34 of its A300 aircraft by the end of 2009, compared to the previous retirement schedule that extended through 2012. In 2008, AMR will retire 30 MD-80s, 10 A300s and 26 Saab turbo-prop aircraft, and will retire or remove from service 37 regional jets. The remaining A300s will be retired in 2009, which is expected to result in capacity reductions next year. As it begins to replace its MD-80 fleet, the Company continues to expect to take delivery of 70 more-fuel-efficient Boeing 737-800 aircraft in 2009 and 2010.

Given the current industry environment, AMR has decided to place on hold its planned divestiture of American Eagle, its regional affiliate, until industry conditions are more stable and favorable. AMR continues to believe that a divestiture makes sense in the long term for AMR, American, American Eagle, and their stakeholders, but AMR also believes that a divestiture is not sensible amid current conditions.

The percentage of total seats filled was 82.5 percent during the second quarter, compared to 83.6 percent in the second quarter of 2007. American's second-quarter yield, which represents average fares paid, increased 8.5 percent compared to the second quarter of 2007, its 13th consecutive quarter of year-over-year yield increases.

Second Quarter and Other Recent Highlights

-- AMR announced that it recently signed a new multi-year contract with Citibank, its valued AAdvantage program partner. The Company said it expects to see some of the benefits of this new agreement immediately with the full benefits being phased in by 2010.

-- American Airlines Cargo Division (AA Cargo) received the "Customer Excellence and Innovation" award from Descartes Systems Group, a global logistics solutions provider. American was recognized for its excellence and innovation in the implementation of the company's electronic cargo booking system.

-- American began a new chapter in its more than 80-year history by launching its first flight from the United States to Russia. American became the first U.S. air carrier to fly directly out of Chicago O'Hare International Airport to Moscow's Domodedovo International Airport (DME).

-- American took another significant step to enhance the overall travel experience for customers by adding thousands of additional hotel properties to AA.com. The additions make AA.com a compelling resource for booking hotel stays.

Source: AMR Corporation

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