AMR flies in low zone as profit takes a dive

AMR $20.77 $3.49 Shares of AMR, the parent of American Airlines, dropped 14.4 percent yesterday after the company gave a tepid third-quarter outlook and several analysts slashed their profit estimates.

AMR dragged other airline stocks down too.

Late Friday, AMR said in a filing that third-quarter revenue per mile flown by American Airlines passengers would rise 4 percent to 5 percent from a year earlier - less than some analysts were predicting from the busy vacation-travel period.

Jamie Baker, an analyst with JPMorgan, said AMR's comments pointed to slightly lower revenue and higher non-fuel costs than he had expected for the quarter. He also questioned the company's claim that bad weather added to summer costs, calling it "a somewhat flimsy excuse."

Baker cut his estimate of AMR's July-September profit by one-third, to 66 cents per share, from $1.01.

Robert Barry, a Goldman Sachs analyst, also cited AMR's Friday comments in cutting his profit prediction Monday. Barry said AMR would earn 66 cents per share in the quarter, down from his earlier forecast of 88 cents per share.

Before Baker and Barry turned more bearish, a group of 14 analysts surveyed by Thomson Financial had estimated AMR would earn $1.04 per share in the third quarter. AMR is expected to release financial results in mid-October.

Barry said Continental Airlines and UAL's United Airlines had recently given more upbeat revenue forecasts. "Against this backdrop, AMR's result is disappointing," he said in a note to clients.

Barry recently downgraded AMR shares because he expected the airline's unit revenue to grow more slowly than other carriers, mainly on international service, which he said will continue into the fourth quarter.

A Bear Stearns analyst cut his third-quarter profit forecast to 71 cents per share, from $1 per share; while a Morgan Stanley analyst actually raised his forecast, but only to 66 cents per share, from 54 cents per share.

AMR's stumble hit other airline stocks, as investors worried whether industry weakness was more widespread.

Shares of US Airways tumbled $3.41, or 11.6 percent, to $25.98; Delta Air Lines shares fell $1.53, or 8.7 percent, to $16.03; Continental shares lost $2.24, or 6.9 percent, to $30.46; and UAL slipped $2.78 or 6 percent, to $43.23.

Northwest Airlines shares lost 88 cents, or 5.2 percent, to $16.07; shares of Southwest Airlines slipped 35 cents, or 2.3 percent, to $14.99; and Alaska Air shares lost $1.32, or 5.5 percent, to $22.87.