American Airlines lost $436 million in the first quarter as it battled rising jet fuel prices, foreshadowing huge losses at other U.S. airlines.
American responded to the grim numbers Wednesday by announcing it will scale back plans to add new flights and retire at least 25 older, gas-guzzling planes later this year.
Prices for jet fuel have been rising sharply since September, and American spent $1.8 billion on fuel in the first quarter _ an increase of $366 million or 25 percent from this time last year.
AMR said at current oil prices, it expects to spend $1.2 billion more on fuel this year than it did last year.
American was also hurt by winter storms that caused the cancellation of more than 9,000 U.S. flights, and by a slump in travel to Japan after the March earthquake and tsunami. American is working with Japan Airlines to capture more of the lucrative business travel between the two countries.
American's parent, AMR Corp., lost $1.31 per share. Not counting one-time charges for sale-leaseback deals, the company said it would have lost $1.21 per share.
Analysts, who usually exclude such items from their figures, expected a loss of $1.28 per share, according to research firm FactSet. A year ago, AMR lost $505 million, or $1.52 per share.
Revenue rose 9.2 percent, to $5.53 billion, as passenger traffic improved modestly and fares rose since December.
Standard & Poor's kept its "Sell" rating on AMR shares after the report, saying American faces lower average revenue, higher costs, more debt and bigger pension obligations than most of its rivals.
Some analysts think AMR management isn't reacting quickly enough to turn the business around.
J.P. Morgan analyst Jamie Baker suggested that American, which invented the frequent-flier program and pioneered revenue-boosting strategies, didn't have many ideas "beyond new flights to Helsinki." He said the market would reward AMR for "some really fresh thinking."
Ray Neidl, an analyst for Maxim Group, said in a note to clients that AMR management "needs to be more radical in addressing the challenges and coming up with bold new concepts" to meet changing industry conditions.
The first quarter is usually the weakest for airlines, and analysts predict that United Continental, Delta and several other U.S. airlines also lost money. Wall Street thinks most airlines will turn profitable by year-end, but not AMR.
AMR CEO Gerard Arpey said demand for air travel, especially for business, is still improving, "and that enabled us to keep our planes relatively full while charging higher fares."
Airlines have been raising fares to offset higher fuel costs. They can drive up prices by reducing capacity _ the supply of seats for sale. American had planned to boost capacity later this year, but those plans are changing as fuel prices rise.
The airline said Wednesday it will reduce expansion plans, especially on U.S. flying, although it still expects to increase fourth-quarter capacity 2.2 percent above the same period in 2010.
American said it will retire at least 25 MD-80 aircraft this year to save fuel and add newer planes to its fleet.
Even with the scaled-back capacity plans _ the second in as many months _ Arpey said American expected to avoid layoffs but might reduce hiring.
American's troubled labor relations were on display at airports around the country Wednesday. Union members picketed to protest stock-based compensation for several hundred managers while they live with small wage increases.
Flight attendants held a vote and "convicted" AMR management of "managerial incompetence."
American was the first of the major U.S. airlines to report earnings. United Continental, Southwest Airlines and JetBlue are scheduled to report on Thursday. Delta and US Airways will release earnings next week.
AMR shares fell 6 cents to close at $5.64.