Friday, April 23, 2010

AMR Corporation Reports First Quarter 2010 Net Loss of $505 Million on Rising Fuel Prices and Continuing Economic Challenges

Company Maintains Focus on Building Strategy to Support Its Flight Plan 2020

Received Tentative DOT Approval for Immunized Joint Business with British Airways and Iberia

American Filed for Antitrust Immunity with Japan Airlines

Announced New Flights and Routes in New York City and Partnerships with JetBlue and NYC & Company

FORT WORTH, Texas, April 21 /PRNewswire-FirstCall/ -- Today, AMR Corporation (NYSE: AMR), the parent company of American Airlines, Inc., reported a net loss of $505 million for the first quarter of 2010, or $1.52 per share. The results include the impact of a $53 million, or $.16 per share, special item related to the devaluation of the Venezuelan currency in January. Excluding that special item, AMR lost $452 million, or $1.36 per share, in the first quarter.

This compares to a net loss of $375 million, or $1.35 per share, in the first quarter of 2009. The first quarter 2009 results included a $13 million charge, or $0.05 per share, related to A300 aircraft retirements during that quarter. Excluding that special item, AMR lost $362 million, or $1.30 per share, in the first quarter of 2009.

"While we made significant progress in improving revenue performance in the first quarter and enhancing our competitive position, we were simply unable to overcome the challenges of the global economic environment coupled with once-again escalating fuel prices," said AMR Chairman and CEO Gerard Arpey. "As we move forward, we remain focused on continuing to bolster our domestic and international networks, managing our costs, and finding ways to generate additional revenue. I want to thank employees for their commitment as we continue to face challenges, and I am confident that our overall strategy, anchored by our Flight Plan 2020, will position us for long-term success."

American reached important milestones in the first quarter as it seeks to bolster future revenue and expand American's global network through strategic partnerships and other initiatives. American and Japan Air Lines (JAL), which reaffirmed its partnership in the global oneworld® Alliance, filed for anti-trust immunity with the U.S. Department of Transportation (DOT) for a trans-Pacific joint business between North America and Asia.

In addition, the DOT granted tentative approval for American to begin an immunized trans-Atlantic joint business with British Airways and Iberia Airlines, and the airlines continue to work with European Commission regulators to achieve approval of their plans. American expects that the joint business will be launched in the second half of this year.

As part of its domestic network strategy that focuses resources in its cornerstone markets of Dallas/Fort Worth, Chicago, Miami, Los Angeles and New York, American bolstered its commitment to New York with several important initiatives.

American announced new flights and routes at New York's LaGuardia Airport and John F. Kennedy International Airport (JFK), as well as an inter-airline passenger agreement with JetBlue Airways for service to and from New York City and Boston. By year end, at LaGuardia and JFK combined, American and American Eagle will add 31 total flights to and from 13 additional airports, bringing total NYC departures to 216 and unique destinations to 63. American customers will have new access to 18 domestic routes on JetBlue that don't overlap American's existing network, and JetBlue customers will have new access to 12 non-overlapping international routes of American's. When combined with new options for travel on JetBlue, American's New York customers will have access to 81 destinations on 271 nonstop flights by the end of 2010.

American believes these New York service enhancements, together with related facilities and aircraft upgrades and an expanded marketing partnership with the city's tourism arm, NYC & Company, will build additional passenger demand for its international network to Europe, Asia and South America, including its planned trans-Atlantic and trans-Pacific joint businesses.

"Strengthening and defending our global network is an integral part of our strategy, and we made significant progress in the first quarter to expand our global reach, which our loyal customers will appreciate," said Arpey. "We look forward to starting our joint business with British Airways and Iberia later this year, as well as to proving our case that we should be granted anti-trust immunity with JAL. And, we believe our link to JetBlue and increased commitment to New York position us exceedingly well to compete effectively in the hugely important New York City market."

Financial and Operational Performance (Excluding Impact of Special Items)

AMR reported first quarter consolidated revenues of approximately $5.1 billion, an increase of 4.7%, year over year. American, its regional affiliates, and AA Cargo, as well as the 'other revenue' category, experienced year-over-year increases, as total operating revenue was approximately $229 million better in first quarter 2010 compared to the first quarter of the previous year.

Consolidated passenger revenue per available seat mile (unit revenue) grew 7.3 percent compared to the first quarter of 2009, while mainline unit revenue at American grew 6.8 percent. Tight capacity control that drove higher load factors and revenue management efforts led to the increase. Inclement weather and natural disasters in Haiti and Chile reduced revenue by an estimated $20-25 million in the first quarter.

Passenger yield, which represents the average fares paid, increased at American by 3.7 percent year over year in the first quarter. Mainline unit costs in the first quarter increased 5.7 percent year over year, excluding fuel costs. Non-fuel unit cost performance was driven primarily by headwinds associated with capacity reductions, costs associated with maintenance events that were completed earlier than planned, and revenue-related expenses.

Including the impact of fuel hedging, AMR paid $211 million more for jet fuel in the first quarter, at an average of $2.23 per gallon, than it would have paid at prices prevailing during the first quarter of 2009, when it paid $1.91 per gallon. Mainline capacity, or total available seat miles, in the first quarter decreased by 2.5 percent compared to the prior year's first quarter, as the Company seeks to maintain capacity discipline.

American's mainline load factor or percentage of total seats filled was 77.9 percent during the first quarter of 2010, 2.2 points higher than the year-ago period.

Balance Sheet Update

AMR ended the first quarter with approximately $5.0 billion in cash and short-term investments, including a restricted balance of $460 million, compared to a balance of $3.3 billion in cash and short-term investments, including a restricted balance of $462 million, at the end of the first 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 $15.9 billion at the end of the first quarter of 2010, compared to $14.4 billion a year earlier.

AMR's Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $11.4 billion at the end of the first quarter, compared to $11.5 billion in the first quarter of 2009.

Other First Quarter Highlights

• The day following the earthquake in Haiti in January, the company began sending humanitarian supplies to Haiti. To date, American Airlines and American Eagle have transported more than 400,000 pounds of aid into Haiti through 30 relief missions. In addition, American Airlines and American Eagle employees raised funds and provided assistance for Haiti through programs such as American Giving, the UNICEF "Champions for Children," the American Airlines Credit Union and the "Hope for Haiti" Telethon. The airlines worked with numerous not-for-profit organizations, including the American Red Cross, The Sandals Foundation, Airline Ambassadors International, and Project C.U.R.E.
• American Airlines Cargo Division was named "International Airline of the Year" by the Express Delivery and Logistics Association. AA Cargo opened its newly-relocated cargo terminal at JFK Airport; a state-of-the-art facility with more than 135,000 square feet of warehouse space and 24 dock doors, and its new cargo terminal at Los Angeles International Airport (LAX), which has a 3,000-square-foot cooler for perishables, expanded areas for courier cargo and mail processing, and a designated area for live animals.
• India's Kingfisher Airlines agreed to join the oneworld Alliance. Kingfisher is on track to join the alliance in 2011. Russia's S7 Airlines is set to join the alliance later in 2010 after agreeing to join in mid-2009.
• American expanded its mobile boarding pass program to 19 additional airports. Customers departing from select airports can choose to receive their boarding passes electronically on their mobile phones or PDAs, saving time and bypassing the need to print and present a paper boarding pass at the airport. The program is now available at 27 airports.
• American Airlines filed in February an application with the U.S. Department of Transportation (DOT) to acquire two daily slot pairs to operate year-round scheduled service to Tokyo International Airport at Haneda (HND), starting Oct. 1, 2010. American proposed to fly to Haneda from JFK and LAX, the two largest markets between the U.S. mainland and Tokyo.

Guidance

Mainline and Consolidated Capacity

AMR expects its full-year mainline capacity to increase by 1.0 percent in 2010 compared to 2009, with domestic capacity down 0.2 percent and an increase of international capacity of 3.0 percent compared to 2009 levels. On a consolidated basis, AMR expects full-year capacity to increase by 1.5 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 second quarter of 2010 to increase by 0.7 percent compared to the second quarter of 2009, with domestic capacity expected to be down 0.3 percent and international capacity expected to be up 2.4 percent compared to second quarter 2009 levels. AMR expects consolidated capacity in the second quarter of 2010 to increase by 1.0 percent compared to the second quarter of 2009.

Fuel Expense and Hedging

While the cost of jet fuel has been increasing recently and remains very volatile, based on the April 9 forward curve, AMR is planning for an average system price of $2.43 per gallon in the second quarter of 2010 and $2.40 per gallon for all of 2010. Consolidated consumption for the second quarter is expected to be 704 million gallons of jet fuel.

AMR has 39 percent of its anticipated second quarter 2010 fuel consumption hedged at an average cap of $2.47 per gallon of jet fuel equivalent ($95 per barrel crude equivalent), with 38 percent subject to an average floor of $1.89 per gallon of jet fuel equivalent ($70 per barrel crude equivalent). AMR has 33 percent of its anticipated full-year consumption hedged at an average cap of $2.43 per gallon of jet fuel equivalent ($93 per barrel crude equivalent), with 32 percent subject to an average floor of $1.82 per gallon of jet fuel equivalent ($67 per barrel crude equivalent).

Mainline and Consolidated Cost per Available Seat Mile (CASM), Excluding Special Items

The expected 1.5 percent increase in consolidated cost per seat mile, excluding fuel and special items, for 2010 is primarily due to anticipated higher revenue-related expenses (such as booking fees and commissions), airport-related expenses (such as landing fees and facilities costs), and financing costs related to new aircraft deliveries.