American Airlines Reports $162 Million Third Quarter Loss

AMR Corporation, parent of American Airlines, reported a net loss of $162 million in the third quarter, blaming the volatility of crude oil prices and foreign exchange rates. Because its fuel hedging was ineffective, American said it paid $653 million more for fuel in the third quarter of 2011 than it would have a year ago.

On the other hand, American reported third quarter revenue totaled $6.38 billion, $30 million better than expected, largely because the airline charged an average of 7 percent more on fares. It was the airline fourth straight losing quarter. American hasn't turned a full-year profit since 2007, and it has lost more than $12 billion since 2001. All other major carriers have been reporting profits.

American is the only U.S. legacy carrier that to not declare bankruptcy; United Airlines, Delta Air Lines and Northwest Airlines declared bankruptcy in 2004 and 2005; Continental Airlines went into bankruptcy in the late 1990s. In addition, consolidation in the industry with the Continental-United and Delta-Northwest mergers has meant American has fallen from the biggest airline to the third biggest, putting it at a competitive disadvantage. There also has been some speculation in the market that American could declare bankruptcy, particularly after a wave of pilot retirements and a stock price that continues to fall.

Gerard Arpey, American’s chairman and CEO, said that the airline is focusing on cots cutting. Earlier this week, American said it recessed negotiations with its pilots union after making “significant progress” toward a contract that would end more than five years of talks. Negotiations will resume later this week. American has stepped up negotiations to seek waivers of contract provisions that would help it cover staffing shortages caused by pilot retirements. The situation provided a “window of opportunity” to conclude talks, according to the Allied Pilots Association, which represents American’s pilots.

In October, American said it would reduce its fall and winter schedule, which is expected to result in fourth quarter mainline capacity that is approximately 3 percent lower on a year-over-year basis. While advance bookings are generally in line with last year, the airline said it is taking these additional steps in light of the uncertain economic environment, ongoing high fuel costs and to ensure it runs a reliable schedule for its customers given the additional pilot retirements it anticipates throughout the fourth quarter.

With these latest moves, American expects full year 2011 capacity to be up about 0.4 percent year-over-year for mainline and consolidated capacity will be up approximately 1.2 percent. The company’s initial plan, announced in January, called for full-year mainline capacity to increase and consolidated capacity to increase by more than 3 and 4 percent respectively.

As of Sept. 30, American had approximately $4.8 billion in cash and short-term investments, including a restricted balance of $474 million, compared to a balance of $5.0 billion in cash and short-term investments, including a restricted balance of $447 million, at the end of the third quarter 2010. It said it is upgrading its fleet and has ordered 460 new aircraft from Boeing and Airbus. It also continues to wage a solo battle against the GDSs and online agencies in a struggle over the future of airline distribution.