American Airlines said Wednesday that its revenue is rising, but higher fuel prices are also pushing up costs in the third quarter.
Analysts had mixed reviews for the latest news from American, the nation's third-largest airline. They praised the upbeat revenue forecast but noted that while other airlines are making money, American parent AMR Corp. is expected to post losses through next year.
AMR's stock price has fallen 55 percent this year through Tuesday, and one analyst suggested that management changes may be needed if the company doesn't come up with a plan to win back investor confidence.
The company updated its outlook in a filing Wednesday with the Securities and Exchange Commission. AMR said third-quarter revenue per mile will rise between 7.8 percent and 8.8 percent compared with a year ago, even with a $25 million loss from 1,200 flights cancelled because of Hurricane Irene last month.
Analysts said the upbeat revenue news, along with similar comments from United Continental Holdings Inc. and Delta Air Lines Inc., should ease fears that the weak economy has hurt travel demand.
But analysts were discouraged that AMR expects costs per mile to rise by 9.2 percent to 10.2 percent. Most of the increase is due to jet fuel, but AMR said other costs are rising too.
AMR also said it might take a big write-down in the fourth quarter to cover the falling value of its older planes. American is replacing some of its gas-guzzlers, and recently announced plans to buy 460 planes over the next several years.
A J.P. Morgan analyst widened his estimated third-quarter loss for AMR, and a Dahlman Rose & Co. analyst cut her target price on AMR shares.
The harshest comments, however, came from longtime airline analyst Ray Neidl of Maxim Group LLC, who said management and labor at American Airlines need a wake-up call.
Neidl said the airline's labor costs are too high _ an argument that American's management makes at every opportunity _ and that the company's leaders are riding on its storied history instead of adapting to changes in the industry. American fell from the world's biggest airline in 2008 to No. 3 in the U.S. today as rivals grew through mergers _ first Delta and Northwest, then United and Continental.
"AMR remains an attractive franchise in our opinion that is undermanaged," Neidl wrote in a note to clients. "The current management seems to be more of a caretaker of a deteriorating asset."
Neidl said AMR does not face imminent bankruptcy because it has $4.9 billion in cash _ although that's down by $900 million in just three months. He added if company leaders don't produce a workable plan to regain investor confidence, it may be necessary to replace them "to save the carrier in the long term."
AMR sidestepped a public spat with Neidl. A spokesman said the company doesn't comment on analysts' opinions.
American has raised its revenue with higher fares and by introducing new fees this year _ most recently, charging extra for good seats such as windows and aisles. It hopes to sell more international travel through partnerships with British Airways and Japan Airlines, and it's spinning off the American Eagle regional affiliate, which should eventually save AMR money. New planes from Boeing and Airbus will cut fuel and maintenance costs.
There has been less progress in labor negotiations. The company has been negotiating with pilots, flight attendants and mechanics since 2008.
Shares of AMR fell 15 cents, or 4.3 percent, to close at $3.33. This year's share price drop of 55 percent compares with declines of 13 percent at United Continental, 34 percent at Delta, 35 percent at Southwest Airlines Co., and 40 percent at US Airways Group Inc.
David Koenig can be reached at http://www.twitter.com/airlinewriter