AMR sees unit costs down despite high fuel prices
Reuters News -- March 17, 2004
By Kathy Fieweger
CHICAGO, March 17 (Reuters) - AMR Corp. <AMR.N>, the parent
of American Airlines, on Wednesday said a key gauge of overall
costs will drop sharply in the first quarter compared with a
year earlier even though fuel prices are surging.
Jet fuel is the second largest expense for an airline,
behind its employee costs. But savings in other areas at
American, including massive wage concessions extracted last
year to avoid bankruptcy, are pushing overall costs lower.
The cost per available seat mile, or CASM, for American's
mainline fleet is projected at around 9.48 cents for the
quarter, a nearly 17 percent decrease from year-ago levels.
After retreating sharply throughout the year and earlier
this week following bombings in Madrid, all major U.S. airline
stocks were higher on Wednesday. AMR shares rose 4.3 percent.
Some Wall Street analysts have forecast full-year losses
instead of potential profits, as airlines around the world are
suffering from crude oil prices that are near 20-year highs.
For the full year, AMR said it has revised its fuel cost
forecast upward to 99 cents per gallon from a previously
estimated 87 cents per gallon. It will consume about 3.02
billion gallons of jet fuel in 2004, the company said in a
regulatory filing with the Securities and Exchange Commission.
In the spring of last year, AMR narrowly avoided a
bankruptcy filing largely by convincing its unionized labor
groups to give massive wage concessions.
For the full year, AMR said its mainline CASM is expected
to be 9.34 cents, an 8 percent reduction from year-ago levels.
COMPETITION ON LONGER U.S. FLIGHTS
Wall Street analyst Sam Buttrick of UBS on Tuesday said he
expects AMR to lose money this year, after earlier predicting a
profit. He cited fuel costs and weaker-than-expected revenue.
While a number of carriers have succeeded in cutting costs,
revenue for the industry continues to be a problem.
Lehman Brothers analyst Gary Chase on Wednesday said a
revenue report due later in the week from the Air Transport
Association is expected to show a deceleration from January "at
a time when comparisons should be getting easier."
Still, because stocks have fallen sharply, he sees
opportunities for buying stocks of low-fare carriers AirTran
Holdings <AAI.N>, Southwest Airlines <LUV.N> and JetBlue
Airways <JBLU.O>, and also recommends Northwest Airlines
<NWAC.O> and Continental Airlines <CAL.N> among the majors.
For the first quarter, Fort Worth, Texas-based AMR said any
year-over-year improvements in revenue per available seat mile
or unit revenue are likely to be "more than offset by
intensifying competition - particularly on U.S.
transcontinental routes -- and the effects of significant
increases in industry capacity."
AMR said it expects to end the quarter with more than $3
billion in cash plus about $500 million in restricted cash and
short-term investments.
Shares of AMR rose 53 cents to $12.98 on the New York Stock
Exchange, while the American Stock Exchange airline index
<.XAL> rose 2.9 percent to 53.86.
© Copyright Reuters 2004. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
Reuters News -- March 17, 2004
By Kathy Fieweger
CHICAGO, March 17 (Reuters) - AMR Corp. <AMR.N>, the parent
of American Airlines, on Wednesday said a key gauge of overall
costs will drop sharply in the first quarter compared with a
year earlier even though fuel prices are surging.
Jet fuel is the second largest expense for an airline,
behind its employee costs. But savings in other areas at
American, including massive wage concessions extracted last
year to avoid bankruptcy, are pushing overall costs lower.
The cost per available seat mile, or CASM, for American's
mainline fleet is projected at around 9.48 cents for the
quarter, a nearly 17 percent decrease from year-ago levels.
After retreating sharply throughout the year and earlier
this week following bombings in Madrid, all major U.S. airline
stocks were higher on Wednesday. AMR shares rose 4.3 percent.
Some Wall Street analysts have forecast full-year losses
instead of potential profits, as airlines around the world are
suffering from crude oil prices that are near 20-year highs.
For the full year, AMR said it has revised its fuel cost
forecast upward to 99 cents per gallon from a previously
estimated 87 cents per gallon. It will consume about 3.02
billion gallons of jet fuel in 2004, the company said in a
regulatory filing with the Securities and Exchange Commission.
In the spring of last year, AMR narrowly avoided a
bankruptcy filing largely by convincing its unionized labor
groups to give massive wage concessions.
For the full year, AMR said its mainline CASM is expected
to be 9.34 cents, an 8 percent reduction from year-ago levels.
COMPETITION ON LONGER U.S. FLIGHTS
Wall Street analyst Sam Buttrick of UBS on Tuesday said he
expects AMR to lose money this year, after earlier predicting a
profit. He cited fuel costs and weaker-than-expected revenue.
While a number of carriers have succeeded in cutting costs,
revenue for the industry continues to be a problem.
Lehman Brothers analyst Gary Chase on Wednesday said a
revenue report due later in the week from the Air Transport
Association is expected to show a deceleration from January "at
a time when comparisons should be getting easier."
Still, because stocks have fallen sharply, he sees
opportunities for buying stocks of low-fare carriers AirTran
Holdings <AAI.N>, Southwest Airlines <LUV.N> and JetBlue
Airways <JBLU.O>, and also recommends Northwest Airlines
<NWAC.O> and Continental Airlines <CAL.N> among the majors.
For the first quarter, Fort Worth, Texas-based AMR said any
year-over-year improvements in revenue per available seat mile
or unit revenue are likely to be "more than offset by
intensifying competition - particularly on U.S.
transcontinental routes -- and the effects of significant
increases in industry capacity."
AMR said it expects to end the quarter with more than $3
billion in cash plus about $500 million in restricted cash and
short-term investments.
Shares of AMR rose 53 cents to $12.98 on the New York Stock
Exchange, while the American Stock Exchange airline index
<.XAL> rose 2.9 percent to 53.86.
© Copyright Reuters 2004. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
