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AMR First Quarter 2010 Results


First Quarter and Full Year 2009 Results


Gerard J. Arpey
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Thomas W. Horton
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Today, AMR Corporation reported a net loss of $505 million for the first quarter of 2010, which included the impact of a $53 million special item related to the devaluation of the Venezuelan currency in January. Excluding that special item, AMR lost $452 million in the first quarter. This compares to a net loss of $375 million in the first quarter of 2009, which included a $13 million charge related to A300 aircraft retirements. Excluding that special item, AMR lost $362 million in the first quarter of 2009.

Gerard Arpey, AMR’s Chairman and CEO, noted significant progress in improving revenue performance in the first quarter and enhancing American’s competitive position. However, the revenue improvement could not overcome the challenges of the global economic environment coupled with once-again escalating fuel prices. Strategically, the company remains focused on continuing to bolster its domestic and international networks, managing costs, and generating additional revenue. American reached important milestones in the first quarter (see release for details).

Operating Results

  • AMR reported first quarter consolidated revenues of approximately $5.1 billion, an increase of 4.7%, year over year.
  • Total operating revenue, which includes American, its regional affiliates, and AA Cargo, as well as the ‘other revenue’ category, was approximately $229 million better in first quarter 2010 compared to the first quarter of the previous year. Tight capacity control drove higher load factors and revenue management efforts led to a 3.7 percent year-over-year increase in passenger yield in the first quarter.
  • Consolidated passenger revenue per available seat mile (unit revenue) grew 7.3 percent compared to the first quarter of 2009, while mainline unit revenue at American grew 6.8 percent. Inclement weather and natural disasters in Haiti and Chile reduced the increased revenue by an estimated $20-25 million in the first quarter.
  • Mainline unit costs in the first quarter increased 5.7 percent year over year, excluding fuel costs. Non-fuel unit cost performance was driven primarily by capacity reductions, costs associated with maintenance events that were completed earlier than planned, and revenue-related expenses.
  • Including the impact of fuel hedging, AMR paid $211 million more for jet fuel in the first quarter, at an average of $2.23 per gallon, than it would have paid at prices prevailing during the first quarter of 2009, when it paid $1.91 per gallon.
    Mainline capacity, or total available seat miles, in the first quarter decreased by 2.5 percent compared to the prior year’s first quarter, as the Company seeks to maintain capacity discipline.
  • Mainline capacity, or total available seat miles, in the first quarter decreased by 2.5 percent compared to the prior year’s first quarter, as the Company seeks to maintain capacity discipline.

Balance Sheet Update

  • AMR ended the first quarter with approximately $5.0 billion in cash and short-term investments, including a restricted balance of $460 million, compared to a balance of $3.3 billion in cash and short-term investments, including a restricted balance of $462 million, at the end of the first quarter of 2009.
  • AMR’s Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.9 billion at the end of the first quarter of 2010, compared to $14.4 billion a year earlier.
  • AMR’s Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $11.4 billion at the end of the first quarter, compared to $11.5 billion in the first quarter of 2009.

Guidance

  • AMR expects its full-year mainline capacity to increase by 1.0 percent in 2010 compared to 2009. On a consolidated basis, AMR expects full-year capacity to increase by 1.5 percent in 2010 compared to 2009.
  • The Company’s 2010 capacity levels include the reinstatement of flying that was canceled in 2009 due to the H1N1 virus and the launch of Chicago-Beijing service, which was deferred from 2009.
  • AMR expects mainline capacity in the second quarter of 2010 to increase by 0.7 percent compared to the second quarter of 2009. AMR expects consolidated capacity in the second quarter of 2010 to increase by 1.0 percent compared to the second quarter of 2009.
  • Based on the April 9 forward curve, AMR is planning for an average system price of $2.43 per gallon in the second quarter of 2010 and $2.40 per gallon for all of 2010. Consolidated consumption for the second quarter is expected to be 704 million gallons of jet fuel.
  • AMR has 39 percent of its anticipated second quarter 2010 fuel consumption hedged at an average cap of $2.47 per gallon of jet fuel equivalent ($95 per barrel crude equivalent), with 38 percent subject to an average floor of $1.89 per gallon of jet fuel equivalent ($70 per barrel crude equivalent). AMR has 33 percent of its anticipated full-year consumption hedged at an average cap of $2.43 per gallon of jet fuel equivalent ($93 per barrel crude equivalent), with 32 percent subject to an average floor of $1.82 per gallon of jet fuel equivalent ($67 per barrel crude equivalent).

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