American Airlines Parent AMR Loses $97 Million In Q4
FORT WORTH (AP) - American Airlines still trails other carriers in the industry's big comeback.
While the nation's No. 3 airline is doing better than a year ago, thanks to higher fares and money from extra fees, it's still losing money while larger rivals United Continental and Delta are profitable again.
American is pinning hopes for a turnaround on putting more high-dollar business travelers on international flights and on trips between five major U.S. cities.
Even if that strategy works -- and some analysts think it may -- American still faces huge challenges ranging from rising fuel prices to high labor costs. The airline is also locked in an ugly fight with travel agencies that has made it harder to find American flights online.
American parent AMR Corp. said Wednesday it lost $97 million in the fourth quarter, or 29 cents per share. That's smaller than the $344 million loss AMR posted a year ago, and it beat the forecast of analysts, who expected a loss of 36 cents per share, according to FactSet.
Revenue jumped 10.3 percent, to $5.59 billion -- better than analysts expected. Airfares have risen over the past year as airlines limited flights and filled planes with more passengers. The average American flight in 2010 had a record 81.9 percent of seats filled.
The airlines have also raised money by imposing a variety of fees. At AMR, the catchall category of "other revenue," which includes baggage fees and food sales, grew 2.9 percent in the fourth quarter, to $599 million.
Revenue didn't grow fast enough to offset rising fuel costs. AMR and Delta paid about 13 percent more for fuel in the fourth quarter than a year ago. The bill at AMR, which also owns regional carrier American Eagle, was $1.66 billion in the quarter and $6.4 billion for the full year.
Even more troubling, with oil around $92 a barrel and expected to climb, both companies expect fuel costs to rise by at least another $1 billion this year.
AMR CEO Gerard Arpey called that "the most worrisome threat we see."
Hunter Keay, an analyst with Stifel Nicolaus, said AMR's forecast of rising costs suggests that the company is headed for "a pretty sizable loss for 2011."
Ticket prices, which have already increased twice this month, could be going higher. American Airlines passengers paid 6.5 percent more per mile in fares in 2010 than in 2009.
Faced with an oil shock, "The most logical first thing that you do -- even though people don't want to hear this ... is simply to raise your ticket prices," Arpey said.
AMR shares tumbled 60 cents, or 7.2 percent, to close at $7.69.
AMR, based in Fort Worth, lost $471 million for all of 2010. That's expected to be the only full-year loss among the five biggest U.S. carriers. Delta earned $593 million. Dallas-based Southwest, United and US Airways are all expected to report profits.
There are several reasons why AMR lags competitors. It faces tougher government restrictions on international service, trails Delta and United in the important trans-Pacific market, faces higher labor and pension costs, and operates older planes.
Arpey's plan to turn things around revolves around business travelers. It includes boosting traffic over the Pacific and Atlantic in deals with partners British Airways and Japan Airlines. American finally won government approval for those business ventures last year. In the U.S., he said American will focus on five big cities, including New York and Los Angeles, while downplaying others.
"It's a great network," says Michael Derchin, an analyst with CRT Capital Group. "That's a Who's Who of places where business people reside or want to travel."
American said Wednesday it will order two new long-range Boeing 777-300 aircraft to use on international flights. Terms were not disclosed. Boeing Co. lists the planes at $284 million apiece, but good customers routinely get discounts.
American also said it is talking with Expedia and Orbitz about getting its flights listed again on the online travel agencies' websites. American wants to cut ticket-distribution costs by bypassing middlemen such as Sabre Holdings, which charge airlines a fee to provide flight information to the agencies. For now, the dispute has made American flights harder to find online.
This week, Priceline.com agreed to get flight details straight from American. Ray Neidl, an analyst with Maxim Group, said the Priceline deal could be the model American uses to settle disputes with Expedia and Orbitz.
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