Global Airport News

Global Airport News

American Airlines parent AMR posted a smaller-than-expected quarterly loss on Wednesday, helped by cost cuts and fare increases, but high fuel prices prompted the carrier to curb capacity later this year.

American Airlines and its rivals were battered by expensive fuel in the first quarter, although they survived with the help of capacity reductions and fare increases in recent years. AMR said it planned to trim fourth-quarter system capacity by 1 percent.

AMR is the first major US airline to report first-quarter earnings.

"High fuel prices remain one of the biggest challenges to our industry and our company," chief executive Gerard Arpey said in a statement. "We believe our steps to aggressively increase revenues, reduce capacity, control non-fuel operating costs, and bolster liquidity will help us to better manage the challenges we currently face."

The fourth-quarter capacity reduction is in addition to AMR's previously disclosed plan to curb capacity by 1 percentage point for 2011.

Helane Becker, airline analyst with Dahlman Rose, expected a bigger curb in American's fourth-quarter capacity.

"I would like to have seen them do more," she said, adding she expects other major airlines to tinker with capacity as fuel pressures mount.

United Continental, JetBlue Airways and Southwest Airlines are set to report first quarter earnings on Thursday.

"I think everyone is going to talk about fuel costs being a headwind and the concern that's presenting," Becker said.


The Air Transport Association last week said US airlines might set a record for fuel costs when they report results, paying about USD$3 billion more so far this year.

The price of US crude was up $1.06 at USD$109.32 on Wednesday. It started the year at USD$91.31.

Fuel costs for AMR increased 24.8 percent to USD$1.8 billion, the airline's highest cost in the first quarter.

AMR said its first-quarter net loss narrowed to USD$436 million, from USD$505 million a year earlier.

Passenger yield, which represents the average fares paid, increased 6.2 percent year over year, while non-fuel unit costs in fell 1.8 percent.

Revenue increased 9.2 percent to USD$5.5 billion. AMR ended the quarter with about USD$6.3 billion in cash and short-term investments.

Morningstar equity analyst Basili Alukos praised the cut in unit costs, but he noted struggles with fleet management and persistent staff disputes at the company.

"AMR still struggles with an inefficient fleet and an onerous workforce structure, two disadvantages that I don't see improving any time soon," Alukos said. "As such, I'd be hard pressed to see AMR return to profitability this year."