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AMR Corporation Reports 4Q 2010 Net Loss of $97 Million

AMR Corporation Reports 4Q 2010 Net Loss of $97 Million, Compared to a Loss of $344 Million in 4Q 2009 and 4Q Operating Earnings of $68 Million


Gerard J. Arpey
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Thomas W. Horton
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AMR Corporation, the parent company of American Airlines, Inc., today reported a net loss of $97 million, or $0.29 per share, for the fourth quarter of 2010. The fourth quarter 2010 results include the impact of approximately $28 million in a non-cash impairment charge to write down certain route authorities in Colombia as a result of a recent open skies agreement. Excluding this special item, the Company lost $69 million, or $0.21 per share. Results include a $35 million tax benefit primarily related to The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed in late December.

The results for the fourth quarter of 2010 compare to a loss of $344 million, or $1.03 per share, for the fourth quarter of 2009. The fourth quarter 2009 results include the positive net impact of $71 million in non-cash special items and a non-cash tax item. Excluding these special items and the non-cash tax item, the Company lost $415 million, or $1.25 per share, in the fourth quarter of 2009.

For all of 2010, AMR recorded a net loss of $471 million, or $1.41 per share, compared to a loss of $1.5 billion, or $4.99 per share, for 2009. Excluding special items and non-cash tax items, the Company lost $389 million, or $1.17 per share, in 2010, compared to a loss of $1.4 billion, or $4.63 per share, in 2009.

Gerard Arpey, AMR’s Chief Executive Officer, noted several recent examples of success and progress, including:


Launched Joint Business and Expanded Codeshare Cooperation with British Airways and Iberia

  • With the launch of the new joint business between American Airlines, British Airways and Iberia in October, trans-Atlantic flyers now have more access to great fares, additional choices of flight times and easier connections.
  • In December, the carriers implemented a second stage of expanded codesharing, whereby American Airlines’ code is being displayed on over 800 British Airways and Iberia flights to 174 destinations, British Airways’ code is published on over 2,800 American and Iberia flights serving more than 336 destinations, and Iberia publishes its code on more than 350 British Airways and American Airlines flights to 80 destinations.
Joint Business with Japan Airlines
  • The U.S. Department of Transportation (DOT) granted final approval to American Airlines’ and Japan Airlines’ joint request for antitrust immunity and plans for a joint business between North America and Asia.
  • As announced earlier this month, American and Japan Airlines (JAL) plan to initiate their joint business effective April 1, based on the expected start of revenue-sharing on applicable trans-Pacific flights.
  • The carriers will codeshare on a total of 123 routes and will continue to expand their codeshare routes whenever feasible. Moreover, American is expected to begin flying to Tokyo Haneda nonstop from New York's JFK in February of 2011 and add service between Los Angeles and Shanghai in April, both of which are expected to be included in the joint business.
  • Routes within the joint business, not including new flying that has been announced, generated more than $1.5 billion in revenue for the year ended September, 2010.
American Orders Two New Boeing 777-300ER Wide-Body Jets to Support Network Strategy and International Growth
  • In support of American’s global network strategy and to capitalize on international opportunities, the Company announced today that it has entered into an agreement with Boeing to acquire two Boeing 777-300ERs.
  • The two aircraft are expected to be delivered in late 2012.
Update on Distribution
  • American is currently in business discussions with Expedia and Orbitz, two online travel agencies, and in litigation with Travelport and Sabre, Global Distribution Systems (GDS) that provide American’s and other airlines’ fare and schedule information to its travel agency subscribers.
  • The Company’s goal is to have broad cost-efficient distribution channels, offer good fares to customers and provide extensive choices of products and services.
  • While American continues to take steps to resolve these matters, American Airlines fares and schedules – including all international and domestic classes of service – continue to be widely available through a number of outlets, including American’s own website, AA.com, American’s reservations agents, thousands of travel agencies in locations worldwide, online travel agencies, such as Priceline.com, and search engines, such as Kayak.com.
Operating Results
  • AMR reported fourth quarter consolidated revenues of approximately $5.6 billion, an increase of 10.3 percent year-over-year.
  • American and its regional affiliates experienced double-digit, year-over-year increases, as total operating revenue was approximately $523 million better in the fourth quarter 2010 compared to the fourth quarter 2009.
  • American’s mainline passenger revenue per available seat mile (unit revenue) increased by 7.1 percent in the fourth quarter compared to the fourth quarter of 2009. The Company’s fourth quarter unit revenue performance reflects a recovering economy and a significantly improved fare environment, as well as a business travel market that has regained strength.
  • Mainline capacity, or total available seat miles, in the fourth quarter increased by 3.1 percent compared to the same period in 2009, as the Company selectively allocated capacity for growth markets, such as Asia.
  • American’s mainline load factor – or the percentage of total seats filled – was a record 81.6 percent during the fourth quarter, compared to 81.1 percent in the fourth quarter of 2009.
  • American’s fourth quarter passenger yield, which represents average fares paid, increased by 6.5 percent compared to the fourth quarter of 2009. The increase in yield was largely due to a stronger fare environment and increased premium demand.
  • American’s mainline cost per available seat mile (unit cost) in the fourth quarter was consistent with the same period last year, excluding special items in both periods.
  • Taking into account the impact of fuel hedging, AMR paid $2.42 per gallon for jet fuel in the fourth quarter versus $2.17 a gallon in the fourth quarter of 2009, an 11.5 percent increase. As a result, the Company paid $171 million more for fuel in the fourth quarter of 2010 than it would have paid at prevailing prices from the prior-year period.
  • Excluding fuel, mainline unit costs in the fourth quarter of 2010 decreased by 3.0 percent year-over-year, driven by American’s cost control efforts and a modest increase in capacity.
Balance Sheet Update
  • AMR ended the fourth quarter with approximately $4.9 billion in cash and short-term investments, including a restricted balance of $450 million, compared to a balance of $4.9 billion in cash and short-term investments, including a restricted balance of $460 million, at the end of the fourth 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 $16.6 billion at the end of the fourth quarter of 2010, compared to $16.1 billion a year earlier.
  • AMR’s Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $12.1 billion at the end of the fourth quarter, compared to $11.7 billion at the end of the fourth quarter of 2009.
Guidance
  • AMR expects its full-year mainline capacity to increase by 3.6 percent in 2011 compared to 2010, with domestic capacity up 1.0 percent and an increase of international capacity of 7.7 percent compared to 2010 levels. On a consolidated basis, AMR expects full-year capacity to increase by 4.3 percent in 2011 compared to 2010.
  • The Company’s 2011 capacity levels include new service from Los Angeles to Shanghai and New York to Tokyo-Haneda across the Pacific, Chicago to Helsinki and New York to Budapest, as well as additional flights from JFK to Barcelona and Miami to Madrid, across the Atlantic, and Dallas-Fort Worth to Rio de Janeiro (launched in December 2010) in Latin America.
  • AMR expects mainline capacity in the first quarter of 2011 to increase by 3.8 percent compared to the first quarter of 2010, with domestic capacity expected to be up 0.5 percent and international capacity expected to be up 9.2 percent compared to first quarter 2010 levels. AMR expects consolidated capacity in the first quarter of 2011 to increase by 4.7 percent compared to the first quarter of 2010.
Fuel prices are expected to be a significant cost headwind in 2011. The airline remains fully focused on containing costs, despite significant headwinds in a number of areas, including aircraft rent and facilities. As a result, cost per available seat mile for 2011, excluding fuel and the potential impact of any new labor agreements, is expected to be flat to 2010.
1Q2011 (est.) vs. 1Q2010
Full year 2011 (est.) vs. 2010
H/(L)
H/(L)

Mainline
2.8%
3.8%
    Excluding Fuel
(1.6)
0.0
Consolidated
3.0
4.1
    Excluding Fuel
(1.8)
0.0


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