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American Posts Near Billion
Dollar Quarterly Loss
By Jon Herskovitz
| FORT WORTH, Texas (Reuters)
- American Airlines on Wednesday reported a third-quarter net loss of $924
million, despite a cost-cutting campaign aimed at helping the world's largest
carrier recover from hits the industry took after the Sept. 11 attacks
on the United States. American has lost more than $2.5 billion since the attacks last year as the airline industry remains mired in a historic slump driven by decreased demand for air travel. The company said it planned to further slash costs by deferring delivery of 34 Boeing airplanes over the next three years. "Any way you look at them, these are terrible financial results that reflect a sluggish economy, continued weakness in the revenue environment, high fuel prices, the cost of enhanced security and the uncertainty of events in the Middle East," Chairman and Chief Executive Don Carty said. American's parent, AMR Corp. AMR.N , posted a third-quarter net loss of $5.93 per share, compared with a net loss of $414 million, or $2.68 per share, a year ago. Excluding special items, AMR's loss was $475 million, or $3.05 per share. According to Thomson First Call, American was expected to lose $3.06 a share, with loss forecasts ranging from $2.60 to $3.45 a share. The company said its total operating revenue had increased to $4.94 billion in the quarter from $4.82 billion a year ago. It added, however, that its fourth-quarter loss was likely to exceed the third-quarter loss, before special items. Wall Street did not look favorably at the results, sending AMR shares down almost 12 percent to $3.95 on the New York Stock Exchange. The shares were off by about 8.5 percent before the company released its earnings around midday. Over the past year American has announced cost-cutting measures it believes will lead to $1.1 billion in savings as it aims to have permanent cost reductions of $3 billion. Toward that end American said it had reached an agreement with Boeing BA.N for the deferral of a total of 34 airplane deliveries during 2003, 2004 and 2005. Under the agreement, American will take delivery of only 11 planes in 2003 -- nine 767-300s and two 777s -- compared with the original plan of 19, it said. No airplanes will now be delivered to American in 2004 and 2005. "With these and other adjustments to AMR's capital spending plans, the company has further reduced its capital spending plan by more than $1.5 billion from 2003 to 2005," it said in a statement. The company said it also plans to save $100 million in expenses over the next two years by temporarily storing 42 aircraft starting in 2003. After the Sept. 11 attacks, American slashed 20,000 jobs and cut capacity by about 20 percent. The airline announced an additional 7,000 layoffs and a further 9 percent to 11 percent capacity cut about three months ago. The airline industry lost more than $7 billion in 2001 and is on track to lose a similar amount in 2002. Carty has repeatedly said that his airline will be able to weather the storm of bankruptcies rolling through the sector. United Airlines, the No. 2 U.S. airline and a unit of UAL Corp. UAL.N , has said it could be forced to file for bankruptcy protection if it is not able to cut costs sharply. Airline executives, including Carty, asked Congress in recent weeks for a second round of emergency financing to help them survive the decline, which has sent the sixth-largest U.S. airline, US Airways Group UAWGQ.PK , into bankruptcy. In the third quarter, AMR shares fell by about 75 percent, while the American Stock Exchange airline index .XAL fell 54 percent. Early this month American said it would take a $900 million charge to reflect a drop in the value of some of the rivals it has acquired, including parts of bankrupt Trans World Airlines Inc. It said the charge would also be related to its purchase of Reno Air Inc. and ACI Holdings Inc. (AirCal). The charge stems from an accounting rule that forces companies to write down the value of goodwill -- the premium paid to acquire a company over the book value of its assets -- on their books, American said . |
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