- The Washington Times - Wednesday, April 15, 2009

DALLAS (AP) - American Airlines parent AMR Corp. lost $375 million in the first quarter as people flew less this year than they did a year ago, and officials said May and June bookings look like more of the same.

Still, the loss reported Wednesday was much smaller than Wall Street expected, and AMR’s long-depressed shares jumped 79 cents, or 18.7 percent, to close at $5.01 after hitting $5.15 earlier in the day.

Even though it cut flights, American’s planes were not as full. Corporate travel was especially weak and revenue tumbled 15 percent compared with the first quarter of 2008, wiping out the airline’s gain from cheaper fuel.

The question facing airlines and investors is whether the industry has hit bottom, and American stopped short of giving a definitive answer.

American officials said through June advance bookings as a percentage of capacity are running 2 percentage points lower than a year ago even with far fewer flights than last year. They said those numbers were consistent with what they saw in January.

“I’m going to look at it half-full today and say we’re not seeing further deterioration,” said Gerard Arpey, AMR’s chairman and chief executive.

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, and analysts expect all the major carriers 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 slowed slightly to 10.9 percent in March.

Arpey admitted being discouraged that corporate travel remains far weaker than the less-profitable business of hauling vacationers. But if the economy stabilizes, “companies can turn the travel back on as quickly as they turned it off,” he said.

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. Further layoffs are possible, as Air France made clear Wednesday when it announced it would cut 2,500 jobs.

But American notified 4,800 workers Wednesday that it was delaying layoffs considered for next month. An executive said the airline has more airport and cargo agents than it needs but decided against layoffs because recent fare sales raised hopes about summer traffic.

American didn’t say how many layoffs had been contemplated, although 12 employees left voluntarily in March when possible job cuts were discussed. American said it would take other steps to control costs such as cutting agents’ overtime.

Many analysts predict that the airline industry hit bottom in the first quarter. They expect AMR to post a small loss in the April-June quarter and turn a profit in the July-September peak travel season.

UBS analyst Kevin Crissey said AMR reported more revenue and lower costs than he forecast for the first quarter, and that investors bid up the shares on hopes that second-quarter costs will also be lower than expected.

American now expects to reduce costs per mile excluding fuel by 11.5 percent in the second quarter and 10.4 percent for the year, a more aggressive cost-cutting forecast than it gave in January.

The airline didn’t offer revenue forecasts. Helane Becker, an analyst for Jesup & Lamont, said revenue will be “the key to whether or not this surge in the share price is sustainable.”

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, ground workers protested in Fort Worth against millions in stock-based bonuses for several hundred management employees, and on Wednesday the pilots’ union said executives were “enriching themselves at the expense of front-line workers.”

The annual awards are based on how AMR’s shares performed over a 3-year period compared with other airline stocks, which are also sagging. The awards will be smaller this year _ the pilots’ union put them at $6.5 million instead of nearly $300 million over the previous three years.

The company calls the stock awards part of regular compensation for managers, and Arpey said they were linked to helping shareholders.

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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