AMR warns it will post first-quarter loss
Associated Press
FORT WORTH, Texas — AMR Corp., the parent of American Airlines, said yesterday that the slowing economy will cause it to post a "modest'' loss for the first quarter.
AMR, the nation's No. 2 carrier, became the fourth U.S. airline to warn this week about rising losses.
In a brief filing with the U.S. Securities and Exchange Commission, the company said February traffic was below year-ago levels and March traffic is also expected to lag the 2000 figures. The airline cited the softening economy, weather disruptions and a three-day work slowdown by aircraft mechanics at New York's Kennedy Airport, which caused cancelation of about 150 flights.
"As a result of the above factors, we expect to post a modest loss for the first quarter,'' the company said.
Analysts surveyed by First Call/Thomson Financial had expected AMR to earn 30 cents per share.
Also yesterday, UAL Corp., holding company for United Airlines, the world's largest carrier, announced plans to cut costs by $200 million to improve the bottom line as it endures a third straight money-losing quarter following five-plus years of booming profits.
That raises the possibility of layoffs or cutbacks in its daily schedule of 2,300 flights, although the Elk Grove Village, Ill.-based airline declined to comment on specifics. United also remains mired in contract troubles after nearly a full year of labor problems.
"We are making every effort to minimize the impact of our cost-reduction efforts on customer service,'' said James Goodwin, chairman and chief executive officer.
Goodwin said the economy's cooling has had an industrywide effect on business travel — the high-end tickets that airlines count on heavily.
A contract facedown with mechanics has hampered operations since fall. The airline in March has canceled an average of 45 daily flights due to maintenance problems — 2 percent of its schedule — well up from the normal average of 15 to 20, United spokesman Joe Hopkins said.
"The service combined with the economy is hurting them,'' said analyst Ray Neidl of ING Barings. "They're having a harder time winning that business back now'' with the economy cooling.
Wall Street appeared to applaud the company's pledge to cut costs. UAL shares rose $1.45 to close at $36.55 on the New York Stock Exchange — still near its six-year low of $34.06, reached in December.
Delta and Northwest airlines had said earlier this week that they would post larger-than-expected losses in the first quarter. The carriers are struggling with reduced corporate travel after five years of strong industry profits.
American spokesman Mark Slitt said the outlook filed with the SEC was a routine part of the airline's monthly financial updates to Wall Street and not a special warning.
"There is a lot of concern about what's going on with the economy, but we think if there's going to be a hiccup in the economy, we're in a good position,'' Slitt said.
Earlier this week, a federal bankruptcy judge approved American's $742 million bid to buy bankrupt Trans World Airlines Inc., which it plans to fold into its own fleet. Slitt said the prospect of a first-quarter loss would not slow the TWA acquisition.
"That was a strategic decision. We're well down that path at this point,'' he said. The purchase still must be approved by federal regulators.
American earned $56 million, or 34 cents per share, in the fourth quarter, a 36 percent drop from a year earlier, against a backdrop of a slowing economy and higher fuel prices. It is scheduled to report first-quarter results April 18.
In trading yesterday, AMR shares rose $1.73, or more than 5 percent, to $34.54.
