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American Airlines Parent Posts Profit

October 19, 2006|From the Associated Press

DALLAS — The parent of American Airlines, the nation's biggest carrier, reported a slim profit Wednesday for the third quarter as rising revenue offset higher fuel costs.

It was the company's first back-to-back quarterly profit in six years, and shares of AMR Corp. jumped 7.5%.

Analysts expect that other leading U.S. carriers will soon report their second straight profitable quarter and that the recent drop in fuel prices could lift airline profits the rest of the year.

But airline executives, including the leader of American, said it was far too early for the airlines to declare victory after a long slump that had seen them lose more than $50 billion.

AMR said it earned $15 million, or 6 cents a share, in the quarter ended Sept. 30, compared with a loss of $153 million, or 93 cents, a year earlier. Revenue rose 6.6% to $5.85 billion.

The results included a $99-million charge to reduce the value of fuel-hedging contracts. AMR said that without that write-down, it would have earned $114 million, or 45 cents a share.

Analysts expected the company to earn 42 cents a share before one-time items on sales of $5.9 billion, according to a survey by Thomson Financial.

AMR shares rose $1.80 to close at $25.90.

AMR, which also owns the American Eagle regional airline, said it paid $1.77 billion for fuel, $189 million, or 11.9%, more than a year earlier, even though fuel prices had eased by the end of the quarter.

Most other expenses fell. The biggest cost, labor, rose 1.8%.

Fort Worth, Texas-based AMR was also helped by strong demand for travel, which has allowed carriers to raise fares. American flights ran 81.7% full on average, up from 81.2% a year earlier.

The results would have been better without an August terror scare. American estimated that it lost $50 million in revenue after British authorities said they broke up a plot to bomb trans-Atlantic flights.

Ray Neidl, an analyst with Calyon Securities, said he expected slightly better results from AMR, but considering the London scare, "they did fairly well."

Neidl said American would face growing pressure to control costs and sell a better mix of fares -- more seats at higher fares; fewer at deep discounts -- to boost revenue.

Airlines are now in the typically slow fall period, but Neidl said American should be able to raise prices again in the spring.

"If the economy remains strong next year and if fuel moderately declines, it could make 2007 a banner year," he said.

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