This is a multi-part message in MIME format. ------=_NextPart_000_002F_01C22DB6.BE94B630 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: 8bit By Jon Herskovitz FORT WORTH, Texas, July 17 (Reuters) - AMR Corp. (AMR), parent of American Airlines, on Wednesday posted a quarterly loss of nearly half a billion dollars, and warned of a "sizable" third-quarter loss if demand for business travel stays depressed. The second-quarter loss at the world's largest carrier might have been worse if not for cost cuts and a 20 percent reduction in capacity since the Sept. 11 attacks on the United States. "Our bad financial results come at a time when we are doing a very good job as an airline," Donald Carty, AMR's chairman and chief executive, said in a taped message to employees. AMR's losses were reported a day after rival Continental Airlines Inc. posted a $139 million quarterly loss. With the conspicuous exception of no-frills carrier Southwest Airlines (LUV), the nation's top carriers are expected to post the worst second quarter ever, with losses totaling $1.4 billion. The industry's expected second-quarter loss follows a $2.4 billion net loss in the first quarter and about $7 billion in 2001 losses. Fort Worth, Texas-based AMR reported a second-quarter net loss of $495 million, or $3.19 a share, compared with a loss of $507 million, or $3.29 a share, in the year-ago quarter. It has reported losses of about $2.1 billion in the four quarters that have been reported since the Sept. 11 attacks on the United States. "We continued to see a very weak revenue environment in the second quarter," Carty said in a news release. "Although traffic has rebounded nicely since last fall, average fares are at 15-year lows, sharply depressing yields." Carty told employees that AMR has reported losses of more than $1 billion since the start of the year, which he termed "an almost unbelievable amount of money." Weak revenues in South America and Britain also hurt the bottom line, he said. AMR's second-quarter revenue fell from a year ago by nearly 20 percent to $4.48 billion. LARGE LOSSES SEEN AMR expects a "sizable" operating loss in the third quarter if revenues remain weak, and said it might take a pretax writeoff of $1.4 billion on impaired goodwill in the second half of 2002. Chief Financial Officer Jeff Campbell said in a teleconference that in the third quarter of this year, capacity for American Airlines was expected to be down by about 2 percent from last year. He said that unit costs were expected to be better, with a 3.5 percent improvement for American. Credit rating agency Standard & Poor's said its ratings and outlook for the company that were lowered last month were not affected by the results. S&P said American's revenue performance was weak, and that was due to its concentration in weak markets -- domestic business markets, routes to Britain, and routes to South America. AMR chief Carty has said that the airline has suffered from fewer business travelers, who usually pay higher fares. He said that passengers have returned to the skies since the Sept. 11 attacks, but that they are typically buying discounted tickets. Before a special item, AMR posted a quarterly loss of $465 million, or $3.00 per share, compared with a loss of $105 million, or 68 cents a share before special items, a year ago. AMR's results include a $30 million or 19 cents per share after-tax special charge, which stems from a provision of Congress' economic stimulus package that changes the period for carrybacks of net operating losses. Analysts earlier this week on average were expecting AMR to lose $2.99 a share, according to market research firm Thomson First Call, but they revised that estimate to an average loss of $3.04 just before the company reported. The range of estimates was for a loss of $2.75 to $3.30 a share. AMR shares closed off 40 cents, or more than 3 percent at $12.87 on Wednesday on the New York Stock Exchange. The shares fell about 34 percent in the second quarter, slightly more than the 31.7 percent drop in the American Stock Exchange airline index (XAL). "We continue to believe that the large cyclical carriers, such as AMR, provide interesting investment opportunities given our view that the stocks are oversold," said Mike Linenberg, airline analyst at Merrill Lynch. "We think the shares are poised to outperform, especially as the economy recovers," he said. Carty told employees the airline will try to cut its payroll through attrition and other voluntary methods, after warning earlier this month that job cuts were in the works. He has said all items are on the table as American tries to cut costs to compete with Southwest Airlines and smaller low-cost competitors, acknowledging cost-conscious consumers are forcing American to rethink its strategy. AMR has laid off about 20,000 workers since the Sept. 11 attacks. AMR had 123,732 employees as of March. These actions resulted in AMR's unit cost rising less than 1 percent year over year, despite 10.4 percent less capacity, the company said. ©2002 Reuters Limited. ------=_NextPart_000_002F_01C22DB6.BE94B630 Content-Type: image/gif; name="1x1.gif" Content-Transfer-Encoding: base64 Content-Location: http://image.i1img.com/images/ads/1x1.gif R0lGODlhAQABAIAAAAAAAAAAACH5BAEAAAAALAAAAAABAAEAQAICRAEAOw== ------=_NextPart_000_002F_01C22DB6.BE94B630--