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.
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