His next move will be to continue to blame labor for every problem this poorly run airline has = so, cut 3,200 jobs, problem solved!
Way to go Jerry!!!
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AMR CEO Blames Fuel Cost For Loss
By Elizabeth Souder, Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--AMR Corp. (AMR) Chief Executive Gerard Arpey blamed high fuel prices for the airline's fourth-quarter loss, and said he doesn't expect things to get better anytime soon.
In a conference call Wednesday, the head of the world's largest airline, American Airlines, said the fact that competitors continue to add capacity and cut fares also contributed to AMR's problems.
"High oil prices and lower yields were the major contributors," Arpey said. " Unfortunately, barring a change in at least one of these factors, our outlook for 2005 doesn't look any brighter."
AMR's loss for the fourth quarter widened to $387 million from $111 million last year. The Fort Worth, Texas, airline's fuel costs rose by $477 million.
Further, Arpey said, AMR's new fare structure will dilute revenue, at least temporarily. When rival airline Delta Air Lines Inc. (DAL) simplified its fare structure earlier this month, cutting some of its highest fares, American Airlines matched.
"There's no denying that the new fare structure will cause revenue dilution," Arpey said, but added the lower fares should stimulate more business travel, which could offset the revenue loss. Also, he said, the lower fares could attract customers who had been flying low-cost carriers because the fares were lower.
Arpey said American officials are talking to the airline's corporate customers about renegotiating their discounts, in light of the lower fares.
To counter the revenue and fuel cost problems, Arpey said he will continue to drive costs down. In the fourth quarter, unit costs, excluding fuel and special items, dropped 3.8% compared with last year.
In 2005, AMR executives expect unit costs for American Airlines, excluding fuel, to decline another 3%. As part of the planned cost-cuts, the airline will cut 3,200 jobs.
Airline executives plan to add 2.7% more capacity this year, beefing up international capacity 11% and cutting domestic capacity 1%.
"We have been drawing down domestic capacity and trying to raise prices. Unfortunately, many of our competitors are adding capacity, and one in particular lowered prices," he said. "It is perplexing to us that the solution to this environment would be more capacity and lower pricing."
Arpey said he's looking for ways to boost revenue by unbundling some of the airline's services. Already American officials have unbundled food and telephone reservations services, now charging passengers for those services on some flights.
Further, Arpey said he aims to boost capacity in place where American is strong, such as Dallas/Fort Worth airport, where he will increase the number of daily large-jet departures to 540 by the summer from the current 502.
The decision was made, in part, due to Delta cutting back service in DFW, Arpey said. Now, DFW airport officials are offering financial incentives to lure a new hub tenant to the airport, situated between Dallas and Fort Worth.
Arpey said the incentives, and the possibility of facing fresh competition on his home turf, don't delight him.
"We didn't high-five 'em," Arpey said. "I would be disingenuous if I told you I would welcome more competition in this industry. More capacity, more competition, is harmful."
Airlines have until Friday to respond to the airport's incentive offer.
One airline that has turned the offer down flat is Southwest Airlines Co. ( LUV), which operates out of Dallas' Love Field, instead of DFW. Flights out of Love Field are restricted to short-haul markets - only states contiguous to Texas and some Gulf Coast states.
Southwest Chief Executive Gary Kelly said in a separate conference call Wednesday he's stumping for the repeal of the Wright Amendment, the legislation covering the restrictions at Love Field. Kelly said Southwest officials are going door-to-door on Capital Hill to drum up support.
AMR's Arpey said he opposes the repeal of the amendment, and AMR is also active in Washington on the issue. He said AMR made decisions in the 1990s to contribute to expanding the airport, under the assumption that Love Field was restricted to short-haul flights.
Though Southwest's Kelly argues the amendment restricts competition, AMR's Arpey said there's plenty of competition in the Dallas/Fort Worth market.
"There's nothing that prevents Southwest or any other airline from serving any city they want to from DFW. They just have to use the same airport that everybody agreed to use 30 years ago when we built DFW," Arpey said. "Southwest can fly from DFW to anywhere American can. They've just got to follow the same rules as we do."
