AMR Corporation Reports a Third Quarter Loss of $153 Million
FORT WORTH, Texas, Oct 19, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- AMR Corporation (NYSE: AMR), the parent company of American Airlines, Inc., today reported a net loss of $153 million for the third quarter, or $0.93 per share fully diluted. The loss includes a net $58 million negative impact of two special items -- an $80 million charge for a contract termination and a $22 million credit for the reversal of an insurance reserve. Without these special items, AMR would have recorded a net loss of $95 million, or $0.58 per share. The current quarter results compare to a net loss of $214 million, or $1.33 per share fully diluted, in the third quarter last year. Excluding a special item of $18 million, the net loss in the third quarter of 2004 would have been $232 million, or $1.44 per share fully diluted.
"It is certainly disappointing to have swung to a loss after recording our first quarterly profit (without special items) since 2000 in the second quarter of this year," said AMR Chairman and CEO Gerard Arpey. "The fact that we were unable to sustain profitability despite robust customer volumes says a lot about our inability to pass on fuel-price increases to consumers. This underscores the need to accelerate our cost-cutting initiatives across the board under our Turnaround Plan."
Arpey also pointed out that Hurricanes Katrina and Rita, in addition to driving fuel costs significantly higher, adversely impacted results by temporarily reducing air travel, disrupting airline operations and increasing other costs.
American's revenue performance during the third quarter was marked by record high load factors and significantly improved yields. The mainline load factor -- or percentage of total seats filled -- was 81.2 percent, an increase of 3.3 points compared to a year ago. Yield, which represents average fares, was up 8 percent.
"Strong demand, combined with capacity restraint, enabled us to gain some traction on the revenue side of the ledger," Arpey said. "We saw our first significant yield increase in some time. But there is still a disconnect between the price of fuel and the price of air travel. Just to cover the increase in fuel costs over the past two years, American would have had to raise fares nearly $75 per roundtrip ticket. During this time period, our average fare increased by only $15."
During the third quarter, the Company paid $525 million more for fuel than it would have paid at last year's fuel prices -- and $204 million more than it would have paid using the average price from the second quarter. American's mainline cost per available seat mile in the quarter was up by 9.7 percent year over year. Excluding fuel and special items, the mainline unit cost was down by 2.4 percent year over year.
"The progress we have made in reducing our non-fuel expenses is a big reason why we are in better shape than some of our competitors," Arpey said. "But to assure our future, we must accelerate our rate of progress, and bring our costs to levels that will allow us to compete fully with both the low-cost segment of the industry and the carriers in, or emerging from, bankruptcy reorganization."
Arpey noted that American produces a product people truly enjoy. "Our challenge, as always," he said, "is to leverage the public's love of travel in a way that is as rewarding to our shareholders as it is to our customers. The people of American Airlines are working collaboratively to make that happen."
Arpey pointed out that despite the Company's challenges, AMR contributed $75 million to its various defined benefit plans in the third quarter and another $22 million on Oct. 14, bringing its total contributions to the plans this year to $310 million. AMR ended the period with $3.9 billion in cash and short-term investments, including a restricted balance of $499 million.
Looking forward, the Company expects to post -- at the current level of fuel prices -- a significant loss in the fourth quarter.
Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. When used in this release, the words "expects," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook" and similar expressions are intended to identify forward-looking statements. Forward- looking statements include, without limitation, the Company's expectations concerning operations and financial conditions, including changes in capacity, revenues and costs, future financing plans and needs, overall economic conditions, plans and objectives for future operations, and the impact on the Company of its results of operations in recent years and the sufficiency of its financial resources to absorb that impact. Other forward-looking statements include statements which do not relate solely to historical facts, such as, without limitation, statements which discuss the possible future effects of current known trends or uncertainties or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company undertakes no obligation to publicly update or revise any forward- looking statement, whether as a result of new information, future events, or otherwise.
Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations. The following factors, in addition to other possible factors not listed, could cause the Company's actual results to differ materially from those expressed in forward-looking statements: changes in economic, business and financial conditions; the Company's substantial indebtedness; continued high fuel prices and the availability of fuel; further increases in the price of fuel; the impact of events in Iraq; conflicts in the Middle East or elsewhere; the highly competitive business environment faced by the Company, characterized by increasing pricing transparency and competition from low cost carriers and financially distressed carriers; historically low fare levels and fare simplification initiatives (both of which could result in a further deterioration of the revenue environment); the ability of the Company to reduce its costs further without adversely affecting operational performance and service levels; uncertainties with respect to the Company's international operations; changes in the Company's business strategy; actions by U.S. or foreign government agencies; the possible occurrence of additional terrorist attacks; another outbreak of a disease (such as SARS) that affects travel behavior; uncertainties with respect to the Company's relationships with unionized and other employee work groups; the inability of the Company to satisfy existing financial or other covenants in certain of its credit agreements; the availability and terms of future financing; the ability of the Company to reach acceptable agreements with third parties; and increased insurance costs and potential reductions of available insurance coverage. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the 2004 Form 10-K.
Detailed financial information follows:
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three Months Ended September 30, Percent
2005 2004 Change
Revenues
Passenger - American Airlines $4,428 $3,838 15.4
- Regional Affiliates 570 488 16.8
Cargo 152 149 2.0
Other revenues 335 287 16.7
Total operating revenues 5,485 4,762 15.2
Expenses
Wages, salaries and benefits 1,664 1,696 (1.9)
Aircraft fuel 1,582 1,056 49.8
Other rentals and landing fees 337 295 14.2
Depreciation and amortization 292 317 (7.9)
Commissions, booking fees and
credit card expense 292 288 1.4
Maintenance, materials and
repairs 269 265 1.5
Aircraft rentals 148 152 (2.6)
Food service 136 145 (6.2)
Other operating expenses 726 593 22.4
Special charges (credits) --- (18) *
Total operating expenses 5,446 4,789 13.7
Operating Income (Loss) 39 (27) *
Other Income (Expense)
Interest income 40 19 *
Interest expense (240) (219) 9.6
Interest capitalized 12 22 (45.5)
Miscellaneous - net (4) (9) (55.6)
(192) (187) 2.7
Loss Before Income Taxes (153) (214) (28.5)
Income tax --- --- ---
Net Loss $(153) $(214) (28.5)
Basic and Diluted Loss Per Share $(0.93) $(1.33)
Number of Shares Used in Computation
Basic and Diluted 164 161
* Greater than 100%
AMR CORPORATION
OPERATING STATISTICS
(Unaudited)
Three Months Ended
September 30, Percent
2005 2004 Change
American Airlines, Inc. Mainline Jet
Operations
Revenue passenger miles (millions) 37,025 34,659 6.8
Available seat miles (millions) 45,613 44,515 2.5
Cargo ton miles (millions) 539 529 1.9
Passenger load factor 81.2% 77.9% 3.3 pts.
Passenger revenue yield per
passenger mile (cents) 11.96 11.07 8.0
Passenger revenue per available
seat mile (cents) 9.71 8.62 12.6
Cargo revenue yield per ton mile
(cents) 28.23 28.11 0.4
Operating expenses per available
seat mile, excluding Regional
Affiliates (cents) (A) 10.62 9.68 9.7
Fuel consumption (gallons, in
millions) 763 773 (1.3)
Fuel price per gallon (cents) 187.6 125.4 49.6
Regional Affiliates
Revenue passenger miles (millions) 2,386 1,959 21.8
Available seat miles (millions) 3,326 2,840 17.1
Passenger load factor 71.7% 69.0% 2.7 pts.
AMR Corporation
Average Equivalent Number of Employees
American Airlines 75,600 80,300
Other 12,900 13,000
Total 88,500 93,300
(A) Excludes $650 million and $539 million of expense incurred related
to Regional Affiliates in 2005 and 2004, respectively.
AMR CORPORATION
NON-GAAP AND OTHER RECONCILIATIONS
(Unaudited)
Three Months Ended
American Airlines, Inc. Mainline Jet Operations September 30,
(in millions, except as noted) 2005 2004
Total operating expenses $5,496 $4,846
Less: Operating expenses incurred related to
Regional Affiliates 650 539
Operating expenses excluding expenses
incurred related to Regional Affiliates $4,846 $4,307
American mainline jet operations available
seat miles 45,613 44,515
Operating expenses per available seat mile,
excluding Regional Affiliates (cents) 10.62 9.68
Impact of special items (cents) (0.12) 0.04
Fuel cost per available seat mile (cents) (3.14) (2.18)
Operating expenses per available seat mile,
excluding impact of special items and
the cost of fuel (cents) 7.36 7.54
Percent change (2.4)%
AMR Corporation
Fuel Price vs. 3rd Quarter 2004
Average fuel price per gallon (cents)
Three months ended September 30, 2005 188.5
Three months ended September 30, 2004 125.9
Change in price (cents) 62.6
2005 consumption (gallons, in millions) x 839.1
Impact of fuel price variance (in millions) $525.3
AMR Corporation
Fuel Price vs. 2nd Quarter 2005
Average fuel price per gallon (cents)
Three months ended September 30, 2005 188.5
Three months ended June 30, 2005 164.2
Change in price (cents) 24.3
2005 consumption (gallons, in millions) x 839.1
Impact of fuel price variance (in millions) $203.9
Note: The Company believes that operating expenses per available seat
mile, excluding special items and the cost of fuel, as well as the
impact of fuel price increases, assist investors in understanding the
impact of fuel prices on the Company's operations, without regard to
special items.
AMR CORPORATION
NON-GAAP AND OTHER RECONCILIATIONS
(Unaudited)
AMR Corporation
Impact of Special Items Three Months Ended
(in millions, except per share amounts) September 30, 2005
Amount EPS
Net loss $(153) $(0.93)
Less: Impact of special items 58 0.35
Net loss excluding special items $(95) $(0.58)
AMR Corporation
Impact of Special Items Three Months Ended
(in millions, except per share amounts) September 30, 2004
Amount EPS
Net loss $(214) $(1.33)
Add: Impact of special items (18) (0.11)
Net loss excluding special items $(232) $(1.44)
Note: The Company believes the loss excluding special items assists
investors in understanding the impact of the current quarter special
items on the Company's financial results.
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Nine Months Ended
September 30, Percent
2005 2004 Change
Revenues
Passenger - American Airlines $12,534 $11,411 9.8
- Regional Affiliates 1,582 1,413 12.0
Cargo 460 452 1.8
Other revenues 968 828 16.9
Total operating revenues 15,544 14,104 10.2
Expenses
Wages, salaries and benefits 4,979 5,039 (1.2)
Aircraft fuel 4,030 2,781 44.9
Other rentals and landing fees 956 901 6.1
Depreciation and amortization 868 963 (9.9)
Commissions, booking fees and
credit card expense 849 863 (1.6)
Maintenance, materials and repairs 761 741 2.7
Aircraft rentals 443 458 (3.3)
Food service 388 421 (7.8)
Other operating expenses 1,979 1,775 11.5
Special charges (credits) --- (49) *
Total operating expenses 15,253 13,893 9.8
Operating Income (Loss) 291 211 37.9
Other Income (Expense)
Interest income 104 47 *
Interest expense (697) (648) 7.6
Interest capitalized 59 60 (1.7)
Miscellaneous - net (14) (44) (68.2)
(548) (585) (6.3)
Loss Before Income Taxes (257) (374) (31.3)
Income tax --- --- *
Net Loss $(257) $(374) (31.3)
Basic and Diluted Loss Per Share $(1.58) $(2.33)
Number of Shares Used in Computation
Basic and Diluted 163 160
* Greater than 100%
AMR CORPORATION
OPERATING STATISTICS
(Unaudited)
Nine Months Ended
September 30, Percent
2005 2004 Change
American Airlines, Inc. Mainline Jet
Operations
Revenue passenger miles (millions) 105,147 98,271 7.0
Available seat miles (millions) 133,485 131,109 1.8
Cargo ton miles (millions) 1,636 1,617 1.2
Passenger load factor 78.8% 75.0% 3.8 pts.
Passenger revenue yield per
passenger mile (cents) 11.92 11.61 2.7
Passenger revenue per available seat
mile (cents) 9.39 8.70 7.9
Cargo revenue yield per ton mile
(cents) 28.11 27.92 0.7
Operating expenses per available
seat mile, excluding Regional
Affiliates (cents) (A) 10.16 9.56 6.3
Fuel consumption (gallons, in
millions) 2,242 2,276 (1.5)
Fuel price per gallon (cents) 162.9 112.7 44.5
Regional Affiliates
Revenue passenger miles (millions) 6,588 5,355 23.0
Available seat miles (millions) 9,452 7,958 18.8
Passenger load factor 69.7% 67.3% 2.4 pts.
(A) Excludes $1.9 billion and $1.5 billion of expense incurred related
to Regional Affiliates in 2005 and 2004, respectively.
AMR CORPORATION
NON-GAAP AND OTHER RECONCILIATIONS
(Unaudited)
Nine Months Ended
American Airlines, Inc. Mainline Jet Operations September 30,
(in millions, except as noted) 2005 2004
Total operating expenses $15,419 $14,072
Less: Operating expenses incurred related to
Regional Affiliates 1,860 1,543
Operating expenses excluding expenses
incurred related to Regional Affiliates $13,559 $12,529
American mainline jet operations available
seat miles 133,485 131,109
Operating expenses per available seat mile,
excluding expenses incurred related to
Regional Affiliates (cents) 10.16 9.56
Current AMR Corp. news releases can be accessed on the Internet.
The address is: http://www.aa.com
SOURCE AMR Corporation
Al Becker, Corporate Communications of AMR Corporation, +1-817-967-1577, or corp.comm@aa.com
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