EXCLUDING SPECIAL CHARGES, FOURTH QUARTER LOSS WAS
Facing Economic Uncertainty and Fuel Price Volatility in 2009, Company Plans to Further Trim Capacity, Enhance Global Network, Execute on Fleet Replacement, and Focus on Balance Sheet and Dependability
FORT WORTH, Texas , Jan. 21 /PRNewswire-FirstCall/ -- AMR Corporation (NYSE: AMR), the parent company of American Airlines, Inc., today reported a net loss of
The results for the fourth quarter of 2008 include the impact of two special charges: a
Excluding those special charges, the Company lost
The current quarter results compare to a net loss of
For all of 2008, AMR recorded a net loss of
In 2007, AMR reported a net profit of
Historically high and volatile jet fuel prices continued to challenge the Company in the fourth quarter of 2008. AMR paid
"Our fourth quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said AMR Chairman and CEO Gerard Arpey . "We believe these actions and our fleet renewal efforts have put us on sounder footing as we face continued economic uncertainty, slower travel demand, and fuel price volatility in 2009. We intend to continue managing our business - from capacity and fleet planning to balance sheet repair, fuel hedging and revenue initiatives - conservatively and with discipline. I want to thank employees for their commitment during a difficult 2008. While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009."
Arpey added that American expects to enhance its global network in 2009 by achieving regulatory approval of its antitrust immunity application with fellow oneworld members, which will pave the way for American's planned joint business agreement with British Airways and Iberia and help oneworld compete more effectively with other global alliances. The Company also hopes to build on the beginning strides it made last year to improve dependability and the customer experience, Arpey said.
AMR today provided an update to the delivery schedule for the incoming 76 Boeing 737-800 aircraft that will replace MD-80 aircraft in American's fleet. As a result of Boeing delivery delays, the Company now expects to receive 29 737s in 2009 (compared to 36 expected previously), 39 in 2010 (compared to 40 expected previously) and eight in the first quarter of 2011. The first deliveries are expected near the end of the first quarter of 2009.
As a result of the uncertainty surrounding the economic climate, the Company has decided not to use MD-80s to backfill flying associated with the seven 737s that no longer will be delivered in 2009. Largely as a result of this decision, the Company's 2009 mainline capacity will decline by more than one percentage point compared to previous guidance provided in October. (Capacity expectations for 2009 are outlined in the Guidance section below.)
Financial and Operational Performance
American's mainline passenger revenue per available seat mile (unit revenue), excluding special items, increased by 5.5 percent in the fourth quarter of 2008 compared to the year-ago quarter.
Mainline capacity, or total available seat miles, in the fourth quarter decreased by 8.3 percent compared to the same period in 2007, as the Company continued to reduce capacity given economic conditions and still-challenging fuel prices.
American's mainline load factor - or the percentage of total seats filled - was 78.3 percent during the fourth quarter, its third-highest fourth quarter load factor ever, compared to a record 80.2 percent in the fourth quarter of 2007. American's fourth-quarter yield, which represents average fares paid, excluding special items, increased 8.1 percent compared to the fourth quarter of 2007, its 15th consecutive quarter of year-over-year yield increases.
AMR reported fourth quarter consolidated revenues of approximately
Other revenues, including sales from such sources as confirmed flight changes, purchased upgrades, Buy-on-Board food services, and bag fees, increased 9.7 percent year over year to
AMR reported full-year 2008 revenues of approximately
American's mainline cost per available seat mile (unit cost) in the fourth quarter, excluding special items, increased 6.8 percent year over year. Excluding fuel and special items, mainline unit costs in the fourth quarter increased by 6.8 percent year over year. The fourth quarter increase in mainline unit costs was driven by costs related to the Company's capacity reductions in late 2008, as well as higher material and repair costs, and foreign exchange expense.
Balance Sheet Update
AMR continued to focus on strengthening its balance sheet in the fourth quarter.
AMR ended the fourth quarter with
In spite of increasingly challenging capital and credit markets, during 2008 AMR raised nearly
AMR's Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was
AMR made the full amount of its required
Fourth Quarter 2008 and Recent
Mainline and Consolidated Capacity
AMR expects its full-year mainline capacity to decrease by more than 6.5 percent in 2009 compared to 2008, with a reduction of domestic capacity of approximately 9 percent and a reduction of international capacity of more than 2.5 percent compared to 2008 levels. On a consolidated basis, AMR expects full-year capacity to decrease by nearly 7 percent in 2009 compared to 2008.
AMR expects mainline capacity in the first quarter of 2009 to decrease by more than 8.5 percent compared to the first quarter of 2008, with domestic capacity expected to decline by more than 11.5 percent and international capacity expected to decline by nearly 4 percent compared to first quarter 2008 levels. AMR expects consolidated capacity in the first quarter of 2009 to decrease by more than 8.5 percent compared to the first quarter of 2008.
AMR expects regional affiliate capacity to decline by about 9.5 percent in the first quarter of 2009 compared to the prior-year period and expects full-year regional affiliate capacity to decline by more than 8 percent in 2009 compared to 2008 levels.
Fuel Expense and Hedging
While the cost of jet fuel remains volatile, AMR is planning for an average system price of
Mainline and Consolidated Unit Costs (Excluding the impact of special items)
For the first quarter of 2009, mainline unit costs are expected to decrease 2.9 percent compared to the first quarter of 2008, while first quarter consolidated unit costs are expected to decrease 3.2 percent compared to the first quarter of 2008.
In the first quarter of 2009, mainline unit costs excluding fuel are expected to increase 10.2 percent year over year while consolidated unit costs excluding fuel are expected to increase 9 percent from the first quarter of 2008.
Full-year mainline unit costs are expected to decrease 6.6 percent in 2009 compared to 2008, while full-year consolidated unit costs are expected to decrease 7.1 percent in 2009 compared to 2008.
AMR expects mainline unit costs excluding fuel to be 9.2 percent higher in 2009 versus 2008, while 2009 consolidated unit costs excluding fuel are expected to increase 7.6 percent year over year.
Factors driving the 2009 unit cost increases include: increased defined benefit pension expenses and employee and retiree medical expenses; unit cost pressure associated with capacity reductions in 2009 that were announced today, including increased facility and landing fees; and dependability initiatives.
The largest factor driving increased unit costs is higher pension expense, largely the result of negative investment returns on the Company's pension assets in 2008 related to the broader stock market decline. At the end of 2008, the accumulated benefit obligation (ABO) funded status of AMR's pension plans was approximately 69 percent, compared to 96 percent at the end of 2007. While a material decline, the Company maintains a conservative investment portfolio with a significant position in U.S. Treasury and U.S. agency bonds. As a result, the Company believes that its pension funded status declined less than that of many companies with defined benefit pension plans. According to estimates from consulting firm Mercer, the aggregate ABO funded status for plans sponsored by S&P 1500 companies (including their U.S. and non-U.S. plans) declined by approximately 33 percentage points from year-end 2007 to year-end 2008.
Editor's Note: AMR's Chairman and Chief Executive Officer, Gerard Arpey , and its Executive Vice President and Chief Financial Officer, Thomas Horton , will make a presentation to analysts during a teleconference on Wednesday, January 21 , at 2 p.m. EST . Following the analyst call, they will hold a question-and-answer conference call for media. Reporters interested in listening to the presentation or participating in the media Q&A should call 817-967-1577.
Editor's Note: A live Webcast reporting fourth quarter results will be broadcast on the Internet on Jan. 21 at 2 p.m. EST (Windows Media Player required for viewing)
Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. When used in this release, the words "expects," "plans,"
"anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals are forward-looking statements. Forward-looking statements include, without limitation, the Company's expectations concerning operations and financial conditions, including changes in capacity, revenues and costs; future financing plans and needs; fleet plans; overall economic and industry conditions; plans and objectives for future operations; regulatory approvals and actions, including the Company's application for antitrust immunity with other oneworld alliance members; and the impact on the Company of its results of operations in recent years and the sufficiency of its financial resources to absorb that impact. Other forward-looking statements include statements which do not relate solely to historical facts, such as, without limitation, statements which discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Guidance given in this release regarding capacity, fuel consumption, fuel prices, fuel hedging, and unit costs, and statements of expectations regarding regulatory approval of the Company's application for antitrust immunity with other oneworld members, are forward-looking statements.
Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations. The following factors, in addition to other possible factors not listed, could cause the Company's actual results to differ materially from those expressed in forward-looking statements: the materially weakened financial condition of the Company, resulting from its significant losses in recent years; the ability of the Company to generate additional revenues and reduce its costs; changes in economic and other conditions beyond the Company's control, and the volatile results of the Company's operations; the Company's substantial indebtedness and other obligations; the ability of the Company to satisfy existing financial or other covenants in certain of its credit agreements; continued high and volatile fuel prices and further increases in the price of fuel, and the availability of fuel; the fiercely and increasingly competitive business environment faced by the Company; industry consolidation; competition with reorganized carriers; low fare levels by historical standards and the Company's reduced pricing power; the Company's need to raise substantial additional funds and its ability to do so on acceptable terms; changes in the Company's corporate or business strategy; government regulation of the Company's business; conflicts overseas or terrorist attacks; uncertainties with respect to the Company's international operations; outbreaks of a disease (such as SARS or avian flu) that affects travel behavior; labor costs that are higher than those of the Company's competitors; uncertainties with respect to the Company's relationships with unionized and other employee work groups; increased insurance costs and potential reductions of available insurance coverage; the Company's ability to retain key management personnel; potential failures or disruptions of the Company's computer, communications or other technology systems; changes in the price of the Company's common stock; and the ability of the Company to reach acceptable agreements with third parties. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 , and the Company's Annual Report on Form 10-K for the year ended December 31, 2007 .
Detailed financial information follows: