American Airlines Parent Posts Quarterly Profit
October 18, 2006
American Airlines' parent company AMR on Wednesday reported a quarterly profit, reversing a year-ago loss, as the airline flew fuller planes and charged higher fares.
The parent of the number 1 US airline posted earnings of USD$15 million, compared with a loss of USD$153 million a year earlier.
Excluding a USD$99 million non cash charge related to an accounting rule that affects the way airlines record fuel hedges, AMR reported a profit of USD$114 million.
Record high jet fuel prices have punished airlines. AMR spent 12 percent more on fuel in the third quarter of 2006 than it did a year earlier.
A recent decline in the cost of jet fuel, however, has reduced the airline's projected fuel costs for the second half of 2006 by USD$528 million, compared with its forecast issued in July.
"While falling fuel prices provide significant benefits to our company, fuel prices remain at historically high levels and continue to be volatile," said Gerard Arpey, AMR's chief executive in a statement.
AMR said its revenue amounted to USD$5.85 billion, compared with USD$5.49 billion a year earlier.
"I'm more interested in the fourth quarter where they think they're going to get a break from fuel prices," said Calyon Securities analyst Ray Neidl.
Neidl said that if fuel prices stay where they are or decline further, 2007 could be a "banner year" for US airlines.
AMR said its mainline load factor, or the percentage of total seats filled, was 81.7 percent in the third quarter, while its yield, which represents average fares, jumped 7 percent.
Fort Worth, Texas-based American and its rivals have mounted a recovery this year as they pulled excess capacity -- the number of seats for sale -- from their systems, enabling higher fares. A decline in oil prices since August has further helped the industry.
AMR's Chief Financial Officer Tom Horton said on a conference call with reporters and analysts that American expects to trim its mainline capacity by 0.5 percent in the fourth quarter. Horton also said the carrier expects to pay USD$1.85 per gallon of jet fuel in the fourth quarter.
Arpey said on the conference call that the airline is on track to reach a savings target of USD$700 million this year.
AMR shares fell 7.3 percent in the third quarter, compared with the Amex airline index, which declined 6.6 percent in the same period.
AMR said its cash and short-term investment balance at the end of the third quarter was USD$5.5 billion.
(Reuters)