American Parent AMR Posts 'Dreadful' Loss
Wednesday April 23
DALLAS/CHICAGO (Reuters) - AMR Corp. (NYSE:AMR - News), the parent of American Airlines, on Wednesday posted a quarterly loss of $1.04 billion as the world's largest carrier battles to slash costs and stay out of bankruptcy court.
"Our first-quarter results were truly dreadful," said AMR Chairman and Chief Executive Don Carty, whose future at the company is unclear after a public-relations disaster involving the disclosure of executive perks soon after labor unions had agreed to concessions to keep the company afloat.
A source familiar with the matter said American's loss had been anticipated at around $800 million or $900 million for the quarter, so the $1 billion was clearly staggering.
The Fort Worth, Texas-based airline canceled its regular conference call with Chief Financial Officer Jeff Campbell, citing its "fluid" situation.
AMR's board meets Thursday. Financial sources close to the situation said lawyers are reworking paperwork yet again for a potential bankruptcy filing after the board meets.
One banking source said: "The company's financial condition is not great," adding daily cash burn could be approaching the $10 million per day rate, rather than the $5 million outlined at the end of the fourth quarter.
Other banking sources familiar with American's situation said at least several board members are very unhappy with the way Carty disclosed special funding of pension trusts for 45 executives only after unions had voted on big concession packages.
But Carty was also said to have a number of strong supporters among the board, leaving his future unclear.
A report in The Dallas Morning News on Wednesday cited a source close to the company and the board of directors as saying AMR's board was considering replacing Carty. An AMR spokesman said the company does not comment on rumors.
Talk of an interim replacement centers mostly around Gerard Arpey, president and chief operating officer. Also mentioned as a possible candidate is former CEO Robert Crandall, a no-nonsense outspoken executive who has long criticized high costs in the airline industry.
SHARES RISE, DESPITE GLOOM
The airline said a drop in travel demand due to global uncertainties such as the war in Iraq, high fuel prices and low-fare levels hurt its bottom line for the quarter.
Despite the chaos, AMR shares were up 9.3 percent at $3.75 on the New York Stock Exchange (News - Websites) on Wednesday afternoon. The shares had fallen about 40 percent over the last week and were up on Wednesday amid broad strength in airline stocks.
Fort Worth, Texas-based AMR posted a first-quarter loss of $6.68 per share, compared with a loss of $10.09 per share in the first quarter of 2002, which included a cumulative effect of an accounting change of $988 million, or $6.38 per share. The airline posted a loss of $3.53 a share excluding special items in the first quarter of 2002.
Analysts expected AMR to show a loss of $6.08 per share, with estimates ranging from a loss of $5.18 to $7.00 per share, according to Thomson First Call (News - Websites).
"It's clearly a disappointment even relative to pretty somber expectations," said Gary Chase, analyst at Lehman Brothers, referring to the billion-dollar loss.
In the year-ago quarter, AMR posted a loss of $1.56 billion, which included the effect of the accounting change.
AMR said revenue for the quarter was $4.12 billion, down by about 1 percent from $4.16 billion in the year-ago quarter.
"Liquidity is constrained. Unrestricted cash is believed to have fallen substantially from $1.9 billion at Dec. 31, 2002," said ratings agency Standard & Poor's.
AMR lost an industry-record $3.5 billion in 2002 and has said for months its losses were unsustainable.
The carrier narrowly avoided bankruptcy last week when unions approved concession deals aimed at saving American $1.8 billion a year in labor costs.
Those deals were soon in jeopardy, however, as union officials seethed that American failed to disclose special pension funding and bonuses for executives.
Two of the unions have said they will vote again on the concessions, while the third said it may not certify its vote. American has said it would file for Chapter 11 protection if any one of the unions voted against the cuts.
Wednesday April 23
DALLAS/CHICAGO (Reuters) - AMR Corp. (NYSE:AMR - News), the parent of American Airlines, on Wednesday posted a quarterly loss of $1.04 billion as the world's largest carrier battles to slash costs and stay out of bankruptcy court.
"Our first-quarter results were truly dreadful," said AMR Chairman and Chief Executive Don Carty, whose future at the company is unclear after a public-relations disaster involving the disclosure of executive perks soon after labor unions had agreed to concessions to keep the company afloat.
A source familiar with the matter said American's loss had been anticipated at around $800 million or $900 million for the quarter, so the $1 billion was clearly staggering.
The Fort Worth, Texas-based airline canceled its regular conference call with Chief Financial Officer Jeff Campbell, citing its "fluid" situation.
AMR's board meets Thursday. Financial sources close to the situation said lawyers are reworking paperwork yet again for a potential bankruptcy filing after the board meets.
One banking source said: "The company's financial condition is not great," adding daily cash burn could be approaching the $10 million per day rate, rather than the $5 million outlined at the end of the fourth quarter.
Other banking sources familiar with American's situation said at least several board members are very unhappy with the way Carty disclosed special funding of pension trusts for 45 executives only after unions had voted on big concession packages.
But Carty was also said to have a number of strong supporters among the board, leaving his future unclear.
A report in The Dallas Morning News on Wednesday cited a source close to the company and the board of directors as saying AMR's board was considering replacing Carty. An AMR spokesman said the company does not comment on rumors.
Talk of an interim replacement centers mostly around Gerard Arpey, president and chief operating officer. Also mentioned as a possible candidate is former CEO Robert Crandall, a no-nonsense outspoken executive who has long criticized high costs in the airline industry.
SHARES RISE, DESPITE GLOOM
The airline said a drop in travel demand due to global uncertainties such as the war in Iraq, high fuel prices and low-fare levels hurt its bottom line for the quarter.
Despite the chaos, AMR shares were up 9.3 percent at $3.75 on the New York Stock Exchange (News - Websites) on Wednesday afternoon. The shares had fallen about 40 percent over the last week and were up on Wednesday amid broad strength in airline stocks.
Fort Worth, Texas-based AMR posted a first-quarter loss of $6.68 per share, compared with a loss of $10.09 per share in the first quarter of 2002, which included a cumulative effect of an accounting change of $988 million, or $6.38 per share. The airline posted a loss of $3.53 a share excluding special items in the first quarter of 2002.
Analysts expected AMR to show a loss of $6.08 per share, with estimates ranging from a loss of $5.18 to $7.00 per share, according to Thomson First Call (News - Websites).
"It's clearly a disappointment even relative to pretty somber expectations," said Gary Chase, analyst at Lehman Brothers, referring to the billion-dollar loss.
In the year-ago quarter, AMR posted a loss of $1.56 billion, which included the effect of the accounting change.
AMR said revenue for the quarter was $4.12 billion, down by about 1 percent from $4.16 billion in the year-ago quarter.
"Liquidity is constrained. Unrestricted cash is believed to have fallen substantially from $1.9 billion at Dec. 31, 2002," said ratings agency Standard & Poor's.
AMR lost an industry-record $3.5 billion in 2002 and has said for months its losses were unsustainable.
The carrier narrowly avoided bankruptcy last week when unions approved concession deals aimed at saving American $1.8 billion a year in labor costs.
Those deals were soon in jeopardy, however, as union officials seethed that American failed to disclose special pension funding and bonuses for executives.
Two of the unions have said they will vote again on the concessions, while the third said it may not certify its vote. American has said it would file for Chapter 11 protection if any one of the unions voted against the cuts.
