AMR Leads Disastrous Earnings Parade

Alaska Airlines and Southwest Airlines last week reported third-quarter earnings that likely will stand up as the only profits seen among the nation's nine major airlines. This week, the expected wave of bad news began as AMR Corp. announced a quarterly loss of $414 million.
The company, which includes American Airlines, American Eagle and TWA LLC, said operating revenues were down 8.4 percent, while expenses rose nearly 15 percent. For AA specifically, systemwide load factor decreased four points, while revenue per available seat mile dropped 16.6 percent. Overall, AMR is $964 million in the red for the first nine months of the year.
In a note to employees, CEO Don Carty said the airline would have lost $922 million without more than $500 million in government assistance, which not only would be the largest quarterly loss in company history, but also would have been a larger loss than any full-year result. Carty added that financial ramifications from Sept. 11--including lost revenue and special charges--topped $1 billion and that the fourth-quarter loss will be "very large."
The rest of the major airlines will report earnings throughout the next two weeks and none are expected to be positive. United Airlines, which today is holding a board meeting and reportedly discussing a possible replacement for current CEO Jim Goodwin, likely will report the largest quarterly losses, possibly near $1 billion.
Negatively impacting bottom lines are severely reduced fares. The Air Transport Association yesterday released September figures showing an 18.7 percent decline in the industry's average fare. The average first class fare fell 15.5 percent. ATA chief economist David Swierenga said the drop in fares, coupled with a 32 percent drop in traffic, pushed monthly revenues down 45 percent.