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AMR Posts $465-Million Loss in 2nd Quarter

Earnings: American Airlines' parent warns of more losses if fare discounts and reduced business travel persist.


Citing a 15-year low in average ticket prices, American Airlines parent AMR Corp. reported Wednesday a second-quarter loss of nearly a half a billion dollars and warned of another "sizable" loss for the third quarter if current trends persist.

The world's largest airline indicated that those trends--slack passenger traffic, heavy fare discounting and reduced business travel--will persist through the end of the year. "Key business markets remain very weak," Jeff Campbell, AMR's chief financial officer, said in a conference call with analysts.

The Fort Worth-based airline lost $465 million, or $3 a diluted share, before a tax-related charge in the three months ended June 30. That was in line with analysts' forecasts, but a dreary showing for what usually is a strong quarter for the airline industry. Including the charge, AMR's net loss was $495 million, or $3.19 a share.

American and Continental Airlines--which reported a $139-million quarterly loss Tuesday--set the stage for what is expected to be more than $1 billion in total industry losses when the other airlines post their second-quarter results later this week.

American, like most big network carriers, faces problems on several fronts. Travel demand still is down amid the lackluster economy and the aftermath of Sept. 11. Profitable low-cost, low-fare carriers such as Southwest Airlines and JetBlue Airways are encroaching on American's market share. All these factors are putting downward pressure on ticket prices and reducing American's revenue and yield, or average fare. AMR said its second-quarter revenue plummeted 20% from a year ago, to $4.5 billion from $5.6 billion.

"We continued to see a very weak revenue environment in the second quarter, and although traffic has rebounded nicely since last fall, average fares are at a 15-year low, sharply depressing yields," AMR Chairman Donald Carty said.

American has made some attempts this year to raise leisure fares, but often has been forced to rescind the increases after other carriers, mainly Northwest Airlines, have refused to match the higher prices. Campbell still said the public should expect to "see us try some things to see if we can make any progress" in pushing fares higher.

American also continues to cut costs and adjust its service to reduce its losses. For example, the airline has been paring the frequency of flights on some heavily traveled routes and moving those jetliners to certain leisure markets, where passenger traffic is growing. Even so, "I'd expect [overall] traffic for the third quarter to be about flat" from a year earlier, Campbell said.

AMR did end the quarter with a relatively strong balance sheet, including $2.6 billion in cash. The airline's losses have continued to narrow--from $798 million in last year's fourth quarter and $575 million in the first quarter of 2002.

Separately, American said the Federal Aviation Administration agreed to mediate its dispute with Long Beach Airport, which so far has refused American's request for four more permanent slots at the facility.

Space at Long Beach is scarce because a noise ordinance limits the number of commercial takeoffs to 41 a day. JetBlue has the rights to the 27 remaining spaces, or slots, at the airport, an agreement American says violates state and federal law.

AMR's shares closed Wednesday at $12.87 a share, down 40 cents, on the New York Stock Exchange.


Associated Press contributed to this report.

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