American’s $505 million loss in the first quarter led to some tough words from one analyst Wednesday.
12:00 AM CDT on Thursday, April 22, 2010
By TERRY MAXON / The Dallas Morning News
tmaxon@dallasnews.com
AMR Corp. turned in another abysmal performance in the first quarter, as American Airlines Inc.’s parent said Wednesday it lost $505 million – the third-biggest loss for a first quarter in its history. The results led at least one Wall Street analyst, Jamie Baker of J.P. Morgan, to chide AMR chairman and chief executive Gerard Arpey and chief financial officer Tom Horton for the Fort Worth-based company’s poor results.
“Gerard, I don’t want to beat around the bush here. You got the highest cost. You got the lowest margins. You’re the only major airline expected to lose money this year. Your year-to-date equity performance has trailed that of your peers,” Baker said on a conference call to discuss the quarterly earnings.
“I mean, in other businesses that I can think of, when there’s a company standing out like this, you sort of expect a really major overhaul. And it isn’t clear to me that Flight Plan 2020 is that plan,” Baker said, referring to AMR’s latest strategy to turn around its fortunes.
Saying he was struggling to find a question, Baker concluded, “I guess it has to be: Is this really all you got?”
Arpey and Horton defended AMR’s results compared with those of other airlines. They said they expect revenue to increase when American gets antitrust immunity for its trans-Atlantic alliance with British Airways PLC and Iberia and its Pacific alliance with Japan Airlines.
Arpey said American has a “pretty significant labor cost disadvantage” compared with major competitors that lowered their labor expenses in bankruptcy court. But now many of those airlines are in negotiations or federal mediation with their unions for new contracts, Arpey said.
“I don’t think that is a long-term sustainable advantage for those airlines,” Arpey said. “I would expect, now that all the contracts are amendable virtually across the industry, there’s going to be a lot of convergence in the cost structures across the network carriers.” AMR blamed rising fuel costs and the slow economy for its huge loss in the first quarter, despite rising revenue. AMR’s American and American Eagle operations saw their revenue increase $229 million, while fuel costs went up $178 million over the same quarter in 2009. The $505 million net loss, or $1.52 a share, came on revenue of $5.07 billion. In the ?rst quarter of 2009, AMR lost $375 million, or $1.35 a share, on revenue of $4.84 billion.
The 2010 loss included a $53 million charge caused when Venezuela cut the value of its currency in half in relation to the U.S. dollar in January. Excluding that charge, AMR lost $452 million, or $1.36 a share.