Fuel Prices Widen Losses For American

[Benjamin Ng 0]

DALLAS - American Airlines parent AMR on Wednesday said its fourth-quarter loss widened, as the nation's biggest airline company wrestled with high fuel costs and competition with low-cost rivals.

 

The same day, Southwest Airlines reported a 54 percent jump in fourth-quarter profit, as the bets it made on fuel prices allowed it to dodge for a little longer the spiraling costs that hit American.

 

Revenue increased at both airlines, with planes more crowded and average fares higher. And airline stocks rallied, led by AMR Corp., which rose 47 cents, or 2.5 percent, to close at $19.33 in trading on the New York Stock Exchange.

 

Ray Neidl, an analyst with Calyon Securities, said the stocks were lifted by a decline in oil prices, but that AMR also may have been rewarded for the strength of American's route network and a slightly smaller-than-expected loss.

 

Latin America contributed to AMR's revenue gains, as the region's unit revenue rose 13.1 percent during the fourth quarter and load factor, or occupancy, gained 4.9 percentage points, said Chief Financial Officer James Beer. American - one of the largest private employers in South Florida with about 9,000 employees - bases its Latin American operations at Miami International Airport.

 

Southwest again cashed in on a winning bet it made several years ago on the direction of fuel prices. The carrier bought options that locked in prices on most of its fuel needs through 2009, softening the blow of higher fuel costs. Fuel is its second-largest cost after labor.

 

But American Airlines was too weak financially to buy fuel options in recent years, and it paid the price in the fourth quarter -- $2.02 per gallon.

 

Parent AMR, which also owns the American Eagle commuter line, spent about $400 million more on fuel in the fourth quarter than it did a year earlier.

 

That helped push Fort Worth-based AMR to its loss, which equaled $3.49 per share, after a loss of $387 million, or $2.40 per share, in the fourth quarter of 2004. Excluding $191 million in net one-time costs, AMR said it would have lost $413 million, $2.39 per share.

 

Among the extraordinary items was $73 million in facility-related charges related to construction at MIA. On that basis, Thomson Financial said analysts were expecting a loss of $2.50 per share.

 

Revenue rose 13.8 percent, to $5.17 billion from $4.54 billion a year ago, but that was below analysts' consensus forecast of $5.24 billion.

 

''We need to do more on both the cost and revenue sides of the ledger to return our company to sustained profitability,'' said Chairman and Chief Executive Gerard Arpey.

 

Michael Linenberg, an analyst for Merrill Lynch, said AMR did a good job of controlling costs other than fuel. The airline permanently grounded 27 jets at the end of the year.

 

American's Arpey said he worried that carriers will respond to rising revenue by adding too many flights, which could depress fares.

 

''I'm very concerned that an industry that is chronically destroying capital is continuing to pour investment into the business,'' he said. ``I'm scratching my head over that.''

 

However, that's exactly what a few analysts, such as Neidl, and others like Robert Mann, an airline industry consultant in Port Washington, N.Y., are predicting.

 

''If Continental does expand, we'll see a me-too response,'' Mann said. ``It's great news for travelers -- more low prices.''

 

Miami Herald staff writer Ina Paiva Cordle contributed to this report.

 

http://www.miami.com/mld/miamiherald/busin...al/13658456.htm

Edited January 19, 2006 by Benjamin Ng

[kandiah k 0]

DALLAS - American Airlines parent AMR on Wednesday said its fourth-quarter loss widened, as the nation's biggest airline company wrestled with high fuel costs and competition with low-cost rivals.

 

The same day, Southwest Airlines reported a 54 percent jump in fourth-quarter profit, as the bets it made on fuel prices allowed it to dodge for a little longer the spiraling costs that hit American.

 

Revenue increased at both airlines, with planes more crowded and average fares higher. And airline stocks rallied, led by AMR Corp., which rose 47 cents, or 2.5 percent, to close at $19.33 in trading on the New York Stock Exchange.

 

Ray Neidl, an analyst with Calyon Securities, said the stocks were lifted by a decline in oil prices, but that AMR also may have been rewarded for the strength of American's route network and a slightly smaller-than-expected loss.

 

Latin America contributed to AMR's revenue gains, as the region's unit revenue rose 13.1 percent during the fourth quarter and load factor, or occupancy, gained 4.9 percentage points, said Chief Financial Officer James Beer. American - one of the largest private employers in South Florida with about 9,000 employees - bases its Latin American operations at Miami International Airport.

 

Southwest again cashed in on a winning bet it made several years ago on the direction of fuel prices. The carrier bought options that locked in prices on most of its fuel needs through 2009, softening the blow of higher fuel costs. Fuel is its second-largest cost after labor.

 

But American Airlines was too weak financially to buy fuel options in recent years, and it paid the price in the fourth quarter -- $2.02 per gallon.

 

Parent AMR, which also owns the American Eagle commuter line, spent about $400 million more on fuel in the fourth quarter than it did a year earlier.

 

That helped push Fort Worth-based AMR to its loss, which equaled $3.49 per share, after a loss of $387 million, or $2.40 per share, in the fourth quarter of 2004. Excluding $191 million in net one-time costs, AMR said it would have lost $413 million, $2.39 per share.

 

Among the extraordinary items was $73 million in facility-related charges related to construction at MIA. On that basis, Thomson Financial said analysts were expecting a loss of $2.50 per share.

 

Revenue rose 13.8 percent, to $5.17 billion from $4.54 billion a year ago, but that was below analysts' consensus forecast of $5.24 billion.

 

''We need to do more on both the cost and revenue sides of the ledger to return our company to sustained profitability,'' said Chairman and Chief Executive Gerard Arpey.

 

Michael Linenberg, an analyst for Merrill Lynch, said AMR did a good job of controlling costs other than fuel. The airline permanently grounded 27 jets at the end of the year.

 

American's Arpey said he worried that carriers will respond to rising revenue by adding too many flights, which could depress fares.

 

''I'm very concerned that an industry that is chronically destroying capital is continuing to pour investment into the business,'' he said. ``I'm scratching my head over that.''

 

However, that's exactly what a few analysts, such as Neidl, and others like Robert Mann, an airline industry consultant in Port Washington, N.Y., are predicting.

 

''If Continental does expand, we'll see a me-too response,'' Mann said. ``It's great news for travelers -- more low prices.''

 

Miami Herald staff writer Ina Paiva Cordle contributed to this report.

 

http://www.miami.com/mld/miamiherald/busin...al/13658456.htm

25625[/snapback]

 

 

Well good and bad in a way; LCC taking the lead nowadays !!!!!

 

 

 

[Seth K 3]

I don't think AA lost passengers because of the fuel price risen, it's because their services...........AA sux