AMR Corporation continues to lose money, even in the usually profitable third quarter

AMR Corporation (American Airlines and American Eagle Airlines) (Dallas/Fort Worth) continues to bleed money. AMR Corporation today reported a net loss of $162 million, or $0.48 per diluted share, for the third quarter of 2011, compared to a net profit of $143 million, or $0.39 per diluted share, for the same period of 2010.

According to the airline, “these results reflect the adverse impact of quarter-end volatility in WTI crude oil prices and foreign exchange rates. WTI prices decreased, while jet fuel prices remained high, which resulted in a non-cash item relating to fuel hedging ineffectiveness being recorded in fuel expense. In addition, foreign exchange rates were volatile and the U.S. dollar strengthened during the period, and as a result of revaluing foreign assets, the Company incurred a foreign exchange loss. Altogether, these items, which the Company described on October 10, increased AMR’s net loss by approximately $50 million or 15 cents per share.

In the third quarter, the Company’s overall performance was negatively impacted by fuel prices, which increased 41 percent compared to the prior year period. Taking into account the impact of fuel hedging, AMR paid on average $3.15 per gallon for jet fuel in the quarter versus $2.24 per gallon in the third quarter of 2010. As a result, the Company paid $653 million more for fuel in the third quarter of 2011 than it would have paid at prevailing prices from the corresponding prior-year period.”

In October, American Airlines announced it will adjust its late fall and winter schedule, which is expected to result in fourth quarter mainline capacity that is approximately 3 percent lower on a year-over-year basis.

While advance bookings are generally in line with last year, the Company is taking these additional steps in light of the uncertain economic environment, ongoing high fuel costs and to ensure it runs a reliable schedule for its customers given additional pilot retirements it anticipates throughout the fourth quarter.

With these latest moves, American expects full year 2011 capacity to be up about 0.4 percent year-over-year for mainline and consolidated capacity will be up approximately 1.2 percent. The Company’s initial plan, announced in January, called for full year mainline capacity to increase and consolidated capacity to increase by more than 3 and 4 percent respectively.

In October, American also announced plans to retire up to 11 Boeing 757s in 2012. The retirements will result in maintenance and fuel cost savings.

According to the airline, “while the cost of jet fuel has been increasing recently and remains very volatile, based on the October 7 forward curve, AMR is planning for an average system price of $3.02 per gallon in the fourth quarter 2011 and $3.01 per gallon for all of 2011. Consolidated consumption for the fourth quarter is expected to be 667 million gallons of jet fuel.

AMR has 52 percent of its anticipated fourth quarter 2011 fuel consumption hedged at an average cap of $3.01 per gallon of jet fuel equivalent ($88 per barrel crude equivalent), with 41 percent subject to an average floor of $2.23 per gallon of jet fuel equivalent ($55 per barrel crude equivalent). AMR has 51 percent of its anticipated full-year consumption hedged at an average cap of $2.77 per gallon of jet fuel equivalent ($83 per barrel crude equivalent), with 39 percent subject to an average floor of $2.08 per gallon of jet fuel equivalent ($55 per barrel crude equivalent).”

Copyright Photo: Bruce Drum.

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