AMR Reports Second Quarter 2010 Results, Makes Fleet and Organization Change Announcements
Gerard J. Arpey
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Thomas W. Horton
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Today, AMR Corporation, the parent company of American Airlines, Inc., reported a net loss of $10.7 million for the second quarter of 2010 compared to a net loss of $390 million in the second quarter of 2009. Including the impact of fuel hedging, AMR paid nearly $334 million more for jet fuel in the second quarter, at an average of $2.37 per gallon, than it would have paid at prices prevailing during the second quarter of 2009, when it paid $1.90 per gallon. These results include the impact of significantly higher fuel prices compared to the year-ago quarter. The second quarter 2009 results included the impact of approximately $70 million in non-recurring charges related to the sale of certain aircraft and the grounding of leased Airbus A300 aircraft prior to lease expiration. Excluding those non-recurring charges, the second quarter 2009 loss was $319 million.
AMR Chairman and CEO Gerard Arpey noted substantial progress improving the company's financial performance comparatively, both year-over-year and in sequential quarters. "As we move forward, we remain focused on our primary goals of driving revenue growth, controlling costs, and returning to sustained profitability," said Arpey. "Our plan to achieve these objectives is distinguished by our cornerstone network strategy, the ongoing implementation of our planned joint business agreements in the transatlantic and transpacific markets, additional alliance and network activities, and our ongoing fleet renewal efforts. Taken together, these initiatives are designed to grow revenue, fortify our network, and control our unit costs – all central elements of our Flight Plan 2020. We believe our plan, and these initiatives, are paving the way to a more successful and competitive company." See the complete release for details.
Capitalizing on the momentum from the granting of antitrust immunity across the Atlantic, and anticipating similar immunity across the Pacific, AMR today announced a reorganization of its senior management team.
Tom Horton, previously Executive Vice President Finance and Planning and Chief Financial Officer, has been promoted to President – AMR and American Airlines and will continue to report directly to Arpey. With his expanded responsibilities, Horton will oversee the finance, planning, sales and marketing, customer service and information technology organizations. As part of these changes, Bella Goren will assume the role of Senior Vice President – Chief Financial Officer. Goren, formerly Senior Vice President – Customer Relationship Marketing, will report to Horton.
In addition, American this week announced it will expand its partnership with JetBlue Airways in the coming months, so that members of American’s AAdvantage® program and JetBlue’s TrueBlue® customer loyalty program will be able to earn AAdvantage miles or TrueBlue points, respectively, when they fly only on American and JetBlue cooperative interline routes .
Balance Sheet Update
- AMR reported second quarter consolidated revenues of approximately $ $5.7 billion, an increase of 16.0 percent year over year.
- American, its regional affiliates, and AA Cargo, as well as the ‘other revenue’ category, all experienced double-digit, year-over-year increases, as total operating revenue was approximately $785 million better in second quarter 2010 compared to the second quarter of the previous year.
- Consolidated passenger revenue per available seat mile (unit revenue) grew 16.7 percent compared to the second quarter of 2009, while mainline unit revenue at American grew 16.8 percent. Tight capacity control that drove higher load factors and improving economic conditions drove higher unit revenue.
- Mainline unit costs in the second quarter increased 3.5 percent year over year, excluding fuel costs and 2009 special items. Transatlantic cancellations caused by the eruption of the Icelandic volcano reduced operating earnings by an estimated $17 million.
- Including the impact of fuel hedging, AMR paid nearly $334 million more for jet fuel in the second quarter, at an average of $2.37 per gallon, than it would have paid at prices prevailing during the second quarter of 2009, when it paid $1.90 per gallon.
- Mainline capacity, or total available seat miles, in the second quarter decreased by 0.4 percent compared to the prior year’s second quarter, as the Company continues to maintain capacity discipline.
- AMR ended the second quarter with approximately $5.5 billion in cash and short-term investments, including a restricted balance of $461 million, compared to a balance of $3.3 billion in cash and short-term investments, including a restricted balance of $460 million, at the end of the second 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 $16.1 billion at the end of the second quarter of 2010, compared to $14.2 billion a year earlier.
- AMR’s Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $11.0 billion at the end of the second quarter, compared to $11.4 billion in the second quarter of 2009.
- AMR expects its full-year mainline capacity to increase by 0.9 percent in 2010 compared to 2009. On a consolidated basis, AMR expects full-year capacity to increase by 1.2 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 third quarter of 2010 to increase by 3.0 percent compared to the third quarter of 2009. AMR expects consolidated capacity in the third quarter of 2010 to increase by 3.4 percent compared to the third quarter of 2009.
- Based on the July 8 forward curve, AMR is planning for an average system price of $2.25 per gallon in the third quarter of 2010 and $2.29 per gallon for all of 2010. Consolidated consumption for the third quarter is expected to be 715 million gallons of jet fuel.
- AMR has 44 percent of its anticipated third quarter 2010 fuel consumption hedged at an average cap of $2.38 per gallon of jet fuel equivalent ($89 per barrel crude equivalent), with 43 percent subject to an average floor of $1.81 per gallon of jet fuel equivalent ($66 per barrel crude equivalent). AMR has 38 percent of its anticipated full-year consumption hedged at an average cap of $2.43 per gallon of jet fuel equivalent ($92 per barrel crude equivalent), with 37 percent subject to an average floor of $1.83 per gallon of jet fuel equivalent ($67 per barrel crude equivalent).
The company also announced an order for 35 additional Next Generation Boeing 737-800s, to be delivered in 2011 and 2012. The 35 newly ordered 737s will be in addition to the 84 new 737s that began entering American’s fleet in April 2009, when the Company launched its replacement plan for its MD-80 narrobody fleet. The 737s are 35 percent more fuel-efficient on a seat-mile basis than the MD-80 aircraft that they are replacing – an average savings of 800,000 gallons of fuel per aircraft per year. See the release for full details.
News Release and Webcast Information
AMR’s Chairman and Chief Executive Officer, Gerard Arpey, and its Executive Vice President and Chief Financial Officer, Thomas Horton, will make a presentation to analysts during a teleconference on Wednesday, July 21, 2010, at 2 p.m. EST.
Following the analyst call, they will hold a question-and-answer conference call for media. Reporters interested in listening to the presentation or participating in the media Q&A should call 817-967-1577.
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