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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.
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