The Dallas Morning News
March 2, 2004
AMR Corp.’s improving outlook has Wall Street very interested in buying its bonds and other debt, a senior executive said Tuesday.
Last month, the parent of American Airlines Inc. completed a $323 million offering of convertible securities and a $180 million debt offering backed with spare airplane parts, James Beer, AMR’s chief financial officer, said at an investor conference in New York.
“That has been a surprising source of possible opportunity, and a very welcome one,†he said.
The moves have bolstered AMR’s cash reserves to $3.1 billion, including $500 million in funds that are restricted because they’re tied to workers’ compensation and other corporate needs.
That’s far better than last year at this time, when AMR saw its available cash dip to near $1 billion.
AMR’s results rebound from last year’s brush with bankruptcy, and the carrier has grown more confident that it will be able to finance debt and its capital expenses this year.
However, AMR has very little left to collateralize. It’s already mortgaged its headquarters buildings in Fort Worth, and has only two aircraft from its fleet of more than 700 that could be used to secure more debt.
American’s operating cash flow has improved, Mr. Beer said, though it needs to improve further. Analysts are concerned American’s margin improvement won’t be enough to cover its substantial debt burden.
AMR continues to think about options for its American Eagle subsidiary, the industry’s largest regional carrier, which many analysts say may be spun off. Mr. Beer said no decision has been made.
Other carriers such as Continental Airlines Inc. and Northwest Airlines Inc. have sold off their regional carriers to raise cash.
“I think there is good reason for cautious optimism about the road ahead,†Mr. Beer said.
Investors sold off airline shares Tuesday as they reacted to a negative revenue report from Continental. Continental shares dropped more than 7 percent.
Analysts called Continental’s results “disappointing†Tuesday and said that the industry’s rush to return capacity could hamstring its revenue recovery.
“Our forecast had already assumed weakness for Continental, arising from its exposure to the hyper-competitive transcontinental markets,†Jim Higgins of Credit Suisse First Boston said in a note to investors. “However, the capacity addbacks, much more than we expected, appear to have exacerbated unit revenue weakness.â€
Mr. Beer said American has seen stiff competition on its transcontinental routes from the Northeast, but he declined to specify how much revenue had dropped as JetBlue Airways Corp. and others have added capacity. American will do everything it can to defend those routes, he said.
AMR shares closed down 42 cents to $15.36.
While I think there are some benefits of keeping it under the AMR umbrella, There are a good number of reasons to cut it loose.
March 2, 2004
AMR Corp.’s improving outlook has Wall Street very interested in buying its bonds and other debt, a senior executive said Tuesday.
Last month, the parent of American Airlines Inc. completed a $323 million offering of convertible securities and a $180 million debt offering backed with spare airplane parts, James Beer, AMR’s chief financial officer, said at an investor conference in New York.
“That has been a surprising source of possible opportunity, and a very welcome one,†he said.
The moves have bolstered AMR’s cash reserves to $3.1 billion, including $500 million in funds that are restricted because they’re tied to workers’ compensation and other corporate needs.
That’s far better than last year at this time, when AMR saw its available cash dip to near $1 billion.
AMR’s results rebound from last year’s brush with bankruptcy, and the carrier has grown more confident that it will be able to finance debt and its capital expenses this year.
However, AMR has very little left to collateralize. It’s already mortgaged its headquarters buildings in Fort Worth, and has only two aircraft from its fleet of more than 700 that could be used to secure more debt.
American’s operating cash flow has improved, Mr. Beer said, though it needs to improve further. Analysts are concerned American’s margin improvement won’t be enough to cover its substantial debt burden.
AMR continues to think about options for its American Eagle subsidiary, the industry’s largest regional carrier, which many analysts say may be spun off. Mr. Beer said no decision has been made.
Other carriers such as Continental Airlines Inc. and Northwest Airlines Inc. have sold off their regional carriers to raise cash.
“I think there is good reason for cautious optimism about the road ahead,†Mr. Beer said.
Investors sold off airline shares Tuesday as they reacted to a negative revenue report from Continental. Continental shares dropped more than 7 percent.
Analysts called Continental’s results “disappointing†Tuesday and said that the industry’s rush to return capacity could hamstring its revenue recovery.
“Our forecast had already assumed weakness for Continental, arising from its exposure to the hyper-competitive transcontinental markets,†Jim Higgins of Credit Suisse First Boston said in a note to investors. “However, the capacity addbacks, much more than we expected, appear to have exacerbated unit revenue weakness.â€
Mr. Beer said American has seen stiff competition on its transcontinental routes from the Northeast, but he declined to specify how much revenue had dropped as JetBlue Airways Corp. and others have added capacity. American will do everything it can to defend those routes, he said.
AMR shares closed down 42 cents to $15.36.
While I think there are some benefits of keeping it under the AMR umbrella, There are a good number of reasons to cut it loose.
