American Airlines parent loses $286 million in 2Q

AP News
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Posted: Jul 20, 2011 6:43 PM
American Airlines parent loses $286 million in 2Q

American Airlines' parent company said Wednesday that it lost $286 million in the second quarter as fuel costs offset higher revenue from ticket prices and fees.

AMR Corp. released financial results on the same day it announced the largest plane order _ 460 aircraft from Boeing and Airbus _ in commercial airline history.

The second-quarter loss equaled 85 cents per share. In last year's second quarter, the Fort Worth, Texas, company lost $11 million, or 3 cents per share.

Revenue rose 8 percent to $6.11 billion from $5.67 billion a year ago, due to higher fares and fees.

The loss was wider than Wall Street expected. Analysts polled by FactSet Research predicted a profit of 77 cents per share on revenue of $6.17 billion.

American's fuel costs jumped by $547 million, or 33 percent, from last year. Fuel has overtaken labor as the airline's biggest expense.

J.P. Morgan analyst Jamie Baker called the results "poor," with AMR's margins falling farther behind other airlines. He said American raised many U.S. fares _ normally something Wall Street likes _ but questioned the size of the increase, since a smaller fare hike collapsed last week after Southwest Airlines first matched the higher prices, then rolled them back.

Dahlman Rose & Co. analyst Helane Becker said AMR may continue to struggle to boost revenue enough to offset higher jet fuel costs.

AMR has lost $4.8 billion since the start of 2008 and was the only large U.S. airline to lose money in 2010, a strong year for the industry. It's expected to be the only one among the nation's seven largest airlines to lose money in the second quarter and all of this year.

In an effort to cut fuel costs, American is replacing much of its aging jet fleet with a lineup of newer, more fuel-efficient planes. The airline on Wednesday said it would buy at least 260 planes from Airbus and 200 from Boeing Co. over the next five years. The jets carry a sticker price of more than $38 billion, although big airlines routinely get discounts.

AMR also said that it plans to spin off regional airline American Eagle as a separate company. That should also help reduce expenses by allowing American to seek competing bids from companies that provide connecting flights between big hub airports and smaller cities.

AMR shares fell a penny to close at $4.92.