Squawk7777
24th Jan 2003, 07:05
From Aviation Week today:
American parent AMR Corp. yesterday posted a deep $529 million fourth-quarter loss and a staggering $3.5 billion in red ink for the full year, results CEO Don Carty bluntly declared "unsustainable."
Noting American's cost structure is still "out of step" with the revenue environment facing U.S. domestic airlines, Carty said, "We can't continue to post losses of this magnitude."
The deep losses were in line with analysts' expectations, and the quarterly loss was narrower than last year's $800 million deficit. For the quarter, AA's load factor was up 5.8 points to 69.8%, but the airline's breakeven load factor was 87.7%. Yields were down 6% for the quarter, but unit revenues rose 2.6% to 8.18 cents.
Compared with 2000, unit revenues were down 20% and Chief Financial Officer Jeff Campbell told analysts that the airline's geographic mix is hurting its results. Domestic unit revenues were flat on a four-point load factor increase, worse than the international network.
Campbell said 82% of the domestic system faces competition from low-cost rivals, up from 75% last year. "There is very little pricing power domestically," Campbell said, adding that aggressive fare sales remain "robust." The airline's unit costs fell 5.3%, and he said its cost control was the "one bright spot" in the quarter.
American's drop in expenses was "better than expected" thanks to the carrier's ability to keep a "tight lid" on discretionary spending. AA, however, still needs to cut about $2 billion in annual costs from its budget. "Our cost base remains too high relative to the current revenue environment," he said. The airline's fuel costs jumped 21%, and it has about 40% hedged in the current period.
Campbell expects AA to report another loss in the first quarter similar to the pre-tax results posted in the last quarter. Standard & Poor's yesterday placed its 'BB-' corporate credit ratings and other ratings for AMR Corp. on CreditWatch with "negative implications" due the heavy losses and "diminishing sources of backup liquidity as available collateral is used for borrowings."
AA ended the year with $2.7 billion in cash, down slightly from the $2.8 billion at the end of the third quarter. S&P analyst Philip Baggaley said near-term cash liquidity remains "adequate," but the airline faces the potential acceleration of more than $800 million of bank debt due to likely covenant violations by June 30, and AA has "already used up most of its readily financeable collateral borrowing to cover cash losses."
American parent AMR Corp. yesterday posted a deep $529 million fourth-quarter loss and a staggering $3.5 billion in red ink for the full year, results CEO Don Carty bluntly declared "unsustainable."
Noting American's cost structure is still "out of step" with the revenue environment facing U.S. domestic airlines, Carty said, "We can't continue to post losses of this magnitude."
The deep losses were in line with analysts' expectations, and the quarterly loss was narrower than last year's $800 million deficit. For the quarter, AA's load factor was up 5.8 points to 69.8%, but the airline's breakeven load factor was 87.7%. Yields were down 6% for the quarter, but unit revenues rose 2.6% to 8.18 cents.
Compared with 2000, unit revenues were down 20% and Chief Financial Officer Jeff Campbell told analysts that the airline's geographic mix is hurting its results. Domestic unit revenues were flat on a four-point load factor increase, worse than the international network.
Campbell said 82% of the domestic system faces competition from low-cost rivals, up from 75% last year. "There is very little pricing power domestically," Campbell said, adding that aggressive fare sales remain "robust." The airline's unit costs fell 5.3%, and he said its cost control was the "one bright spot" in the quarter.
American's drop in expenses was "better than expected" thanks to the carrier's ability to keep a "tight lid" on discretionary spending. AA, however, still needs to cut about $2 billion in annual costs from its budget. "Our cost base remains too high relative to the current revenue environment," he said. The airline's fuel costs jumped 21%, and it has about 40% hedged in the current period.
Campbell expects AA to report another loss in the first quarter similar to the pre-tax results posted in the last quarter. Standard & Poor's yesterday placed its 'BB-' corporate credit ratings and other ratings for AMR Corp. on CreditWatch with "negative implications" due the heavy losses and "diminishing sources of backup liquidity as available collateral is used for borrowings."
AA ended the year with $2.7 billion in cash, down slightly from the $2.8 billion at the end of the third quarter. S&P analyst Philip Baggaley said near-term cash liquidity remains "adequate," but the airline faces the potential acceleration of more than $800 million of bank debt due to likely covenant violations by June 30, and AA has "already used up most of its readily financeable collateral borrowing to cover cash losses."