Update: Here is a news story that should clear some things up.
American Airlines on Wednesday said record-high fuel costs pushed it to a hefty third-quarter loss and warned it must cut costs and find new revenue sources to survive in a world of soaring oil prices.
To bolster its balance sheet, American plans to cut jobs, slash the number of seats it puts on sale in the US market and add seats to more planes. It also will look to expand in the Asia-Pacific region to bolster revenue and profit.
The world's largest carrier said it lost USD$214 million, or $1.33 per share, in the third quarter, reversing course from a narrow profit of USD$1 million a year earlier. It warned that it expects fuel costs to make its fourth-quarter loss even worse.
"The harsh reality is that despite our tremendous progress to date, our cost structure remains too high for us to succeed in a world where the price of oil is at such an extraordinary level," said Gerard Arpey, AMR's chief executive.
The airline also said "there will be a reduction in the size of the workforce, although the details for accomplishing this are still being identified."
The carrier said the high cost of fuel added about USD$342 million to its costs in the quarter compared with a year earlier and it has said it expects fuel costs this year to be some USD$1 billion more than a year ago.
Costs per available seat mile were up 2.7 percent from a year ago. A 50 percent rise in fuel expenses drove the increase in this key airline industry cost measure.
To cut costs, AMR said it will withdraw capacity equivalent to 15 narrow-body aircraft in 2005. It expects first quarter 2005 domestic capacity to drop by 5 percent from a year before.
Backing further away from its policy of offering more legroom in coach than rivals, American said it plans to add seats to its MD80, 737, 767 and 777 fleets.
It will also reduce flights in some regions where it flies to two or more airports, and cut flights that are less essential in its domestic network.
Its regional affiliate, American Eagle, has reached an agreement in principle with Embraer to cancel delivery of 18 ERJ-145 regional jet aircraft.
AMR said it expects to record a gain of about USD$145 million in the fourth quarter for the sale of its stake on online travel company Orbitz.
American's revenue per available seat mile declined 2.5 percent, driven by a 4.8 percent drop in passenger yield, or average ticket price.
The company said it ended the quarter with USD$3.6 billion in cash and short-term investments.
American teetered on the brink of bankruptcy over a year ago and it launched a massive cost-cutting campaign that staved off a Chapter 11 filing.
Josh
