- The Washington Times - Wednesday, April 15, 2009

DALLAS (AP) - American Airlines parent AMR Corp. says it lost $375 million in the first quarter as people flew less during the recession than they did a year ago, wiping out the benefit of cheaper fuel.

Still, the loss reported Wednesday was smaller than Wall Street expected, and AMR shares rallied, rising 66 cents, or 15.5 percent, to $4.88 in midday trading.

AMR lost $1.35 per share in the first quarter, including a charge of 5 cents per share related to leases on retired aircraft. Revenue was $4.84 billion.

Analysts surveyed by Thomson Reuters expected AMR to lose $1.68 per share on revenue of $4.73 billion. A year ago, the carrier lost $341 million, or $1.37 per share, on $5.70 billion in revenue.

AMR was the first big U.S. airline company to report first-quarter results, with analysts expecting all the majors but Southwest to post losses, as traffic fell sharply. American’s traffic tumbled 12 percent in the quarter, compared with a year ago, although the drop-off was a slightly smaller 10.9 percent in March.

Chief Executive Gerard Arpey said this year’s outlook remained challenging.

“While lower fuel prices have provided a significant buffer against falling demand in 2009, the struggling economy and capital markets remain significant challenges for American and the rest of the industry,” he said in a statement.

The recession has undercut travel demand and made it harder for airlines to raise fares. Just the opposite _ fare wars _ have broken out as carriers fight over a dwindling pool of passengers.

American and other airlines have responded to the downturn by cutting flights to save money and regain pricing power.

American also continues to struggle with labor-management tensions and is locked in slow-moving contract negotiations with all three of its unions, which want raises. This week, workers protested in Fort Worth against millions in stock-based bonuses for several hundred management employees.

The annual awards are based on how AMR’s shares performed over a 3-year period compared with other airline stocks, and they will be smaller this year. The company calls the payments part of regular compensation for managers.

Fort Worth-based AMR told employees last week it had frozen most hiring and wouldn’t give raises to U.S. nonunion employees, more than one-fourth of its work force.

Arpey said tight credit markets posed another challenge for AMR, and the company boasted Wednesday that it had received a new financing commitment for two new aircraft. AMR plans to add 76 new Boeing 737-800 aircraft by the end of 2011 _ the first two went into service Tuesday _ and the company said it had financing commitments for deliveries “well into the fourth quarter of 2010.”

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