Loss Of $214 Million In Q3; Lrtc To Be Expanded

FWAAA

Veteran
Jan 5, 2003
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AMR loses $214 million; Arpey has some ideas to right the ship:

http://biz.yahoo.com/prnews/041020/daw026_1.html

AMR Corporation Reports a Third Quarter Loss of $214 Million and Ends Quarter With $3.6 Billion in Cash and Short-Term Investments, Including a Restricted Balance of $481 Million

Wednesday October 20, 11:28 am ET

Results Impacted By High Fuel Prices, Low Fares and Multiple Hurricanes

American Announces Series of Steps to Increase Revenues and Reduce Costs

Actions Include American Withdrawing Equivalent of 15 Aircraft in 2005 and American Eagle Not Taking Delivery of 18 Embraer Regional Jets


FORT WORTH, Texas, Oct. 20 /PRNewswire-FirstCall/ -- AMR Corporation (NYSE: AMR - News), the parent company of American Airlines, Inc., today reported a net loss of $214 million in the third quarter, or $1.33 per share. This compares to last year's third quarter net profit of $1 million.

"Our business was buffeted by three dramatic and harmful developments during the third quarter," said AMR Chairman and CEO Gerard Arpey. "The first was record high fuel prices. The second was a weak revenue environment which meant that despite our best efforts -- and unlike other fuel-intensive businesses -- we have been largely unable to pass the higher fuel costs on to our customers. The third development was the unprecedented series of hurricanes, which depressed revenue, increased costs and repeatedly disrupted an important part of our network."

Skyrocketing fuel prices during the quarter resulted in a year-over-year increase of more than 40 cents per gallon, which translated into $342 million in incremental fuel costs compared to a year ago. Meanwhile, American's revenue per available seat mile declined 2.5 percent, driven by a 4.8 percent drop in passenger yield (passenger revenue per passenger mile).

"Weak yields are an industry-wide phenomenon," Arpey said. "Although many industries are getting hammered by high fuel prices, the airline industry has largely been unable to price its product in a way that reflects the higher cost of production. Low cost carrier growth is partly responsible for the depressed fare environment, but there are other factors at work too.

"Specifically, there is a growing disconnect between industry capacity growth in the domestic marketplace and overall economic growth," Arpey said. "While the economy has grown roughly three and a half percent this year, available domestic seat miles are up more than six percent. Making matters worse has been the competitive behavior of some carriers either in or on the verge of bankruptcy."

According to Arpey, the confluence of high fuel prices and low fares has sharpened the company's focus on making the changes necessary to improve the company's financial condition. "The harsh reality is that despite our tremendous progress to date, our cost structure remains too high for us to succeed in a world where the price of oil is at such an extraordinary level," Arpey said. "However, there is still a lot we can do, and are doing, to increase revenues and reduce expenses."

That said, AMR anticipates the record high fuel prices to continue in the fourth quarter -- a quarter that is typically seasonally weak from a revenue perspective. Thus, AMR expects to incur a fourth quarter loss significantly larger than that recorded in the third quarter.

Arpey cited a series of steps American has taken to increase revenues, cut costs and put the airline on a stronger financial footing. One expected outcome of these initiatives is that there will be a reduction in the size of the workforce, although the details for accomplishing this are still being identified. American's new initiatives include:

Aircraft Decisions -- American has decided to withdraw capacity equivalent to 15 narrow-body aircraft in 2005 while its regional affiliate, American Eagle, has reached an agreement in principle with Embraer to not take delivery of the last 18 ERJ-145 regional jet aircraft, scheduled for delivery between July 2005 and February 2006.

Seat Decisions -- American will add back a portion of the coach seats previously removed from its MD80, 737, 767 and 777 fleets. On the MD80 and 737 aircraft, only one of the two rows of coach seats originally removed will be added back to those airplanes. In addition, the MD80 reconfiguration will expand the first class cabin by two seats, in recognition of the value American's customers place on its first class product.

International Expansion -- American intends to increase revenue by continuing its expansion in the growing Asia/Pacific market. Yesterday, the airline announced that it will launch daily nonstop service between Chicago and Nagoya, Japan, on April 3, and resume daily nonstop service between Dallas/Fort Worth and Osaka, Japan, on Nov. 1, 2005. American is also vigorously seeking authority to begin nonstop service between Chicago and Shanghai, China, starting on May 1, 2005.
Simplified Operations -- American has decided to expand upon an experiment it launched in the summer of 2004 in Chicago, in which aircraft types were isolated to certain stations, and flight crew and aircraft were scheduled together. This change of approach will be implemented throughout American's system in 2005, Arpey said. "We are pressing ahead aggressively to streamline and simplify American's operations."

Other Revenue Initiatives -- American's revenue initiatives have involved a variety of fare actions in certain markets as well as the introduction of ticketing fees. American now charges $5 for tickets purchased through U.S. reservations offices while a $10 fee applies to tickets bought at U.S. airport locations. There also is now a fee for paper tickets purchased through travel agents in certain European countries, the Caribbean, Mexico and Latin America for itineraries that are eligible for electronic tickets. Additionally, the U.S. Department of Transportation recently issued a favorable ruling, allowing U.S. carriers to apply fuel surcharges to all of their international routes, which should further improve revenue.

Dallas Reservations Office Consolidation -- To cut costs and increase efficiency, American said it has decided to consolidate its reservations office in south Dallas with its much larger Southern Reservations Office near DFW Airport, saving the company hundreds of thousands of dollars a year in various expenses.
With regard to adding back seats, Arpey said American is acting to increase revenue by eliminating a seating capacity disadvantage largely attributable to the More Room Throughout Coach program the airline launched several years ago. "When we launched More Room Throughout Coach, healthy yields and robust business travel were the norm, and both conditions were essential to the success of More Room," Arpey said. "However, times have changed, and we must acknowledge that in today's low-fare environment, having fewer seats on our aircraft has put us at a real revenue disadvantage compared to other airlines."

Arpey said that as a result of its aircraft and seating changes, American's first quarter domestic capacity will decrease approximately 5 percent. "Given our skyrocketing fuel costs, and our limited ability to pass those costs on to our customers, we feel it is prudent to draw down a portion of our domestic schedule. And rather than decrease flight schedules across the board, we will be focusing our cuts on specific markets where our service is either redundant to service to nearby cities or is less essential to our domestic network. At the same time, we are going to intensify our focus on our areas of strength. For instance, we now plan to increase our flying at Dallas/Fort Worth by 90 operations year over year, a larger increase than we had previously announced," Arpey said.

As a result of the initiatives discussed above, the company reported that some special charges may be recognized in the fourth quarter -- the amount and scope of which are currently being identified. In addition, the company expects to record a gain of approximately $145 million from the sale of its interest in Orbitz (an on-line travel agency in which American holds an ownership stake), if the closing of that sale occurs in the fourth quarter.

"Very challenging industry conditions are nothing new to the people of American Airlines," Arpey said. "We remain committed to continuing to evolve our company by wringing out costs and inefficiency from everything we do. What's more, we are determined to make the hard choices necessary to ensure our company's competitiveness and ultimate success."

Not as bad as some feared, but still bad news.
 
FWflyer said:
Sounds like more layoffs to me. Brace yourselves. :(
[post="192948"][/post]​
I wonder just how long this willl last before Rumors start flying about layoffs and BK. I just see it as an oppurtunity to do better.
 
operaations said:
I wonder just how long this willl last before Rumors start flying about layoffs and BK. I just see it as an oppurtunity to do better.
[post="192993"][/post]​

Arpey just said in the conference call that some layoffs will occur next year due to the increased efficiencies and the reduction in capacity.

Bankruptcy? People who want AA to file Ch 11 will have to wait, since AMR still has over $3 billion of unrestricted cash. Additionally, despite losing $214 million, AMR was cash flow positive in the third quarter. Cash flow positive is much better than at UAL, USAir or DL.
 
Less Room Throughout Coach *and* expansion of really long international flights -- wow what a great combination! :down:

MRTC is the *only* reason I ever chose AA for long-haul flights. Remove that, and I may as well go back to Delta!
 
JS said:
Less Room Throughout Coach *and* expansion of really long international flights -- wow what a great combination! :down:

MRTC is the *only* reason I ever chose AA for long-haul flights. Remove that, and I may as well go back to Delta!
[post="193036"][/post]​

Although you have posted in the past that MRTC wasn't all it was cracked up to be (E+ is generally superior), the near-elimination of it removes the only selling point I could think of to recommend AA to others. Now, if someone tells me about their great transatlantic flight in coach on CO or DL or NW, I'll just smile and agree with them rather than tell them how much nicer it would have been on AA.
 
JS said:
Less Room Throughout Coach *and* expansion of really long international flights -- wow what a great combination! :down:

MRTC is the *only* reason I ever chose AA for long-haul flights. Remove that, and I may as well go back to Delta!
[post="193036"][/post]​

IF THERE IS A DELTA TO GO BACK TOO! :eek:
 
American sees 4th-qtr capacity up 3.5 percent
Wed Oct 20, 2004 02:47 PM ET
DALLAS, Oct 20 (Reuters) - American Airlines parent AMR Corp. (AMR.N: Quote, Profile, Research) on Wednesday said it plans to increase mainline capacity in the fourth quarter by 3.5 percent from a year earlier.

The world's largest airline earlier on Wednesday reported a $214 million third-quarter loss and said it must find ways to cut costs and increase revenue to survive skyrocketing fuel prices.



_____________________________________________________________________-
Why are we adding capacity only to turn around and reduce it?
 
FWAAA said:
Although you have posted in the past that MRTC wasn't all it was cracked up to be (E+ is generally superior), the near-elimination of it removes the only selling point I could think of to recommend AA to others. Now, if someone tells me about their great transatlantic flight in coach on CO or DL or NW, I'll just smile and agree with them rather than tell them how much nicer it would have been on AA.
[post="193045"][/post]​

You got it! I have said (and still say) that MRTC isn't worth paying a premium, but it is worth choosing AA over a competitor.
 
FWAAA said:
Now, if someone tells me about their great transatlantic flight in coach on CO or DL or NW, I'll just smile and agree with them rather than tell them how much nicer it would have been on AA.
[post="193045"][/post]​

Just comparing the 777 fleets of American, Continental and Delta, AA will still have fewer seats than those two competitors.

Delta's 777s hold 277 passengers, Continental's 283 and American's 225 (Pacific) and 236 (Atlantic). Even with the addition of nine seats per plane (one row) the new capacities will be 234 and 245. Granted, AA offers real First Class on it's 777s, which accounts for some of that difference, but that cannot account to more than fourteen seats at the most (16 and 18 seats in the A zone on AA as compared to 30 in the A zone on DL and CO). The bottom line is that AA will have the equivalent of at least two fewer rows of seats per plane than those competitors.
 
TWAnr said:
Just comparing the 777 fleets of American, Continental and Delta, AA will still have fewer seats than those two competitors.

Delta's 777s hold 277 passengers, Continental's 283 and American's 225 (Pacific) and 236 (Atlantic). Even with the addition of nine seats per plane (one row) the new capacities will be 234 and 245. Granted, AA offers real First Class on it's 777s, which accounts for some of that difference, but that cannot account to more than fourteen seats at the most (16 and 18 seats in the A zone on AA as compared to 30 in the A zone on DL and CO). The bottom line is that AA will have the equivalent of at least two fewer rows of seats per plane than those competitors.
[post="193083"][/post]​

AA flies fewer coach seats, but the different lav, galley and closet configurations adds to the difficulty in directly comparing the number of seats, in addition to the points you already made, like the different sizes premium cabins, etc. AA flies substantially more premium seats (which occupy substantially more square footage) than either DL or CO. (And if my friends are in their J product, I wouldn't be telling them how much better AA is.) For seat pitch comparisons, I prefer to use the easy measurements provided by the airlines.

Maybe you're right, but if I compare advertised seat pitch, after AA adds two more rows to the 777s, its seat pitch will go back to the 31 - 32 inch industry standard (just like it was in 1999 before MRTC made the 777s more roomy).

CO and DL both advertise 31 inch pitch (DL actually says 31-33) on their 777s.

In fact, AA's predominant seat pitch will be 31-32 inches, identical to the standard seat pitch at all its competitors, except of course, UAL, where E+ has yet to be eliminated and B6 where 65% of the cabin features 34 inch or better pitch.

So AA no longer holds the AAdvantage. Tell me again, AA that you know why I fly. <_<
 
operaations said:
I wonder just how long this willl last before Rumors start flying about layoffs and BK. I just see it as an oppurtunity to do better.
[post="192993"][/post]​

Several of the Locals are releasing the news for STL & MCI:
561 Furloughs for Maintenance & Related, Stock Clerks.

STL
TWU Furlough Total: 186
Management Total: 9

TWU Breakdown
143 AMTs
8 TCCs
31 Stock Clerks
3 Stock Clerk Crew Chiefs
1 Stock Clerk TCC

Management Breakdown
4 Production Controllers
6 Supervisors
3 Shift Managers

MCI
TWU Furlough Total: 375
No Breadown At This Time.
Title I, II, IV Affected.

No Management Furlough Reported.
____________________________________________

October 20, 2004
URGENT NEWS

TO ALL 563 MEMBERS:

American Airlines has announced today in St. Louis and Kansas City that those Cities will be experiencing Layoffs.

THE TENTATIVE NUMBERS (because they usually change and probably will) are as follows:

St. Louis: 143 AMTs, 8 Tech Crew Chiefs, 31 Stock Clerks, 3 Stock Clerk Crew Chiefs, and 1 Stock Clerk Tech Crew Chief. Also, 4 Production Control Agents, 6 Supervisors, 3 Shift Managers.

Kansas City: 375 combination of Title I, II, & IV, with no report on the number of management.

We will keep you updated as soon as we receive the information.

Sincerely,
Paul W. McCormick
President, Local 563
Transport Workers Union of America
 
FWAAA said:
Maybe you're right, but if I compare advertised seat pitch, after AA adds two more rows to the 777s, its seat pitch will go back to the 31 - 32 inch industry standard (just like it was in 1999 before MRTC made the 777s more roomy).
[post="193101"][/post]​

In his letter to the employees, American Airlines Chairman and CEO Gerard Arpey set forth the following timetable, so you have plenty of time to enjoy the extra legroom on the AA 777:

So starting next April, we are going to be adding back a portion of the seats we previously removed from our MD80, 737 and 767 fleets. A similar reconfiguration of our 777s will take place in October.

In addition, according to both Arpey and the press release, AA is adding only a portion of the coach seats previously removed. It is not going to be as comfortable as MRTC or Economy Plus, but is should still be a cut above Continental's Sardine Class configuration and probably roomier than Delta as well.