American Airlines reports Q1 loss of $328 million and dim full-year outlook
18 April 2008
AMR Corp, parent of American Airlines (AA), said that the carrier had posted a $328 million net loss in the first quarter, compared to an $81 million profit in the year-ago quarter. It also projected a difficult 2008 owing largely to "very volatile" fuel costs.
"There's really no playbook for $110 oil," executive VP, finance and planning, CFO, Tom Horton, said. "That means the revenue and expense equation is broken."
Horton said AA's domestic mainline capacity would be trimmed for the remainder of the year to help defray fuel costs. If crude oil prices continue climbing, he said AA likely will "take a sharp pencil to capacity plans" and consider further cuts.
Chairman and CEO, Gerard Arpey, said that though cost cuts in recent years would allow AA to weather hard times, record fuel costs had created a "new reality" that will "present a significant challenge for the foreseeable future. . .Our unit revenue is in no way keeping pace with the extraordinary price of oil."
Apart from high fuel costs, also adding to the carrier's woes was the forced grounding of its MD-80 fleet for safety related inspections. The groundings led to the cancellation of 3,000 flights and the cost of the groundings is now estimated to be in the "high tens of millions of dollars" and will be reflected in second-quarter results, Horton said.
First-quarter revenue rose 5% to $5.7 billion but expenses lifted 13.6% to $5.88 billion including a 45.4% leap in fuel costs to $2.05 billion. Operating loss was $187 million, a reversal from a $248 million profit in the year-ago period.
Mainline traffic dipped 0.3% to 32.49 billion RPMs on a 1.5% drop in capacity to 41.05 billion ASMs, producing a load factor of 79.1%, which was down one point.
AA plans to "accelerate" replacement of its MD-80 fleet with more fuel efficient 737-800s and "plans" to take delivery of 34 of these aircraft in 2009 and another 36 in 2010.