WingNaPrayer
Veteran
AMR Corporation, the parent company of American Airlines, Inc., today reported a net loss of $111 million for the fourth quarter, or $.70 per share. This compares with last year's fourth quarter net loss of $529 million, or $3.39 per share.
Building on the added momentum of this financial improvement, American announced today a major restructuring of its hub operations at Miami that will make the hub -- American's principal gateway to Latin America -- more efficient, increase its on-time dependability, and give customers added convenience and a wider choice of flights.
The airline also announced that it will enter into a robust new codesharing partnership with Mexicana, the premier airline of Mexico.
AMR's fourth quarter results include a handful of special items -- both gains and losses -- resulting from the company's continuing restructuring efforts, a federal income tax settlement during the quarter, and gains on the sale of investments.
In addition, in keeping with the provisions of SFAS 109, AMR's fourth quarter 2003 results do not reflect a provision for federal and state income taxes. Conversely, AMR's fourth quarter 2002 results reflected a tax benefit.
To provide a better comparison between the two periods, after adjusting for these special items and taxes, the company recorded a loss (pre-tax and excluding special items) of $95 million this quarter, or $.59 per share, versus a loss (pre-tax) of $828 million, or $5.31 per share, in the fourth quarter of last year.
For the fourth quarter of 2003, AMR had operating income of $103 million, excluding special items. In the fourth quarter of 2002, AMR posted a net operating loss of $679 million.
For the full year 2003, AMR reported a net loss of $1.2 billion, or $7.76 per share, compared to a full year net loss of $3.5 billion, or $22.57 per share, in 2002. When adjusted for special items and the year-over-year tax differences mentioned above, AMR posted a 53 percent improvement in financial results, registering a full year loss of $1.5 billion in 2003 compared to a full year loss of $3.2 billion in 2002.
"The improvement in our year-over-year results is a direct result of our ongoing efforts to restructure our business and the willingness of every one of us to sacrifice and accept change as an inevitable fact of life in the airline industry," said Gerard Arpey, AMR's president and CEO.
"While the work required to make our company consistently profitable has just begun, the momentum we have created together is powerful. Perhaps the best illustration of this is the fact that we have now achieved an operating profit, excluding special items, two quarters in a row. And unlike a year ago, when we were burning through millions of dollars of cash every day, our operation is now generating positive cash flow," said Arpey.
The Miami hub restructuring and the new relationship with Mexicana will strengthen American's network and add to the company's financial progress, Arpey said.
With a combined total of more than 130 years of service between the United States and Mexico, American and Mexicana will forge a relationship that will give customers enhanced service to the most important markets in the United States and Mexico, as well as connections across their global networks. For American, it will mean new flight availability to 21 additional cities in Mexico and the ability to offer service in 27 new, nonstop transborder markets.
The relationship also includes a reciprocal frequent-flyer agreement that will allow passengers to accrue and redeem miles in Americans AAdvantage program or Mexicana's Frecuenta program on more than 500 U.S.-Mexico flights per week.
American and Mexicana will launch the partnership in April, pending governmental approval.
In Miami, the airline's principal gateway to Latin America, American will spread its operations more evenly by increasing the number of daily flight banks to 13 from seven, effective May 1. In doing so, the airline will be able to operate more flights in and out of Miami using fewer aircraft, thereby greatly increasing the hub's efficiency and assisting in the company's overall objective to lower costs.
At the same time, the restructured Miami hub will significantly enhance customer service, allowing American to offer passengers more flight choices, giving customers more time to make their flight connections, and spreading out the flow of international passengers in ways that will make it easier to clear customs and immigration processing.
Longer term, the new hub design will give American and American Eagle room to grow at Miami within the framework of the new terminal facility that is now under construction. "Miami is one of the linchpins of our global network," Arpey said. "And this initiative will enable us to operate more flights in and out of that hub -- using fewer aircraft -- reduce costs, and relieve some of the pressure that hub has been under from the ongoing terminal construction project."
At the heart of AMR's financial progress in 2003, Arpey said, were the strides it made toward achieving the company's critical goal of $4 billion in annual capacity-independent cost savings.
These efforts were given a huge boost when employees agreed to a restructuring that added $1.8 billion a year in labor-cost savings to savings of $2 billion a year from strategic initiatives and another $200 million from vendors, suppliers and creditors.
"Lower costs go hand in hand with our ability to protect and build on our leading share in the marketplace," Arpey said. "Today, thanks to the sacrifices, hard work and ingenuity of American's people, our costs -- while still not as low as our low-cost competitors -- are continuing to improve to help us compete vigorously for every customer."
Although unquestionably pleased by its progress, Arpey said AMR is not yet satisfied with its financial results and recognizes that it still has lots of work in front of it.
"We've made great progress," Arpey said, "but we also realize the many challenges that lie ahead."
Arpey pointed to the following progress in each of the four tenets of the AMR Turnaround Plan:
Lower Costs To Compete: This is where AMR has made its most dramatic progress, underscored by an 11.9 percent decline in unit costs in the fourth quarter, excluding special items and regional affiliates. If not for rising fuel prices, AMR's progress would have been even more dramatic, with a year-over-year drop in unit costs of 12.8 percent. To further reduce costs, AMR has returned underused gate space, consolidated terminal space, depeaked its Chicago and Dallas/Fort Worth hub schedules (now adding Miami to that list), closed a reservations center, reduced the size of the St. Louis hub, accelerated the retirement of TWA aircraft, and improved aircraft utilization across the fleet.
Fly Smart, Give Customers What They Value: This tenet focuses on customer service and revenue production, with emphasis on improving AMR's relative revenue performance. Key moves in this area are adding seats to American's 757 and A300 fleets and restructuring the mid-continent hubs at Chicago, DFW and St. Louis (next up, Miami). Another step is expanding alliances. Progress here includes a domestic codeshare with Alaska Airlines, approval of codesharing with British Airways, the addition of SWISS International to the oneworld alliance, and (as announced today) the new codeshare linkage with Mexicana.
Pull Together, Win Together: Fostering greater cooperation than ever between the company and employees, AMR has adopted an unprecedented level of openness with employee groups and labor unions. Arpey holds regular Town Hall-style meetings with employees, AMR's chief financial officer meets monthly with union leaders to walk them through the company's financial results in the same way he briefs AMR's Board, and the Overland Group, a firm expert in bringing union groups and management together, has been engaged to help all parties within AMR move to a philosophy of active involvement. On Jan. 28 and 29, American will conduct its first Customer Strategy meeting with frontline employees to advance this process and improve the customer experience.
Build A Financial Foundation For The Future: AMR ended the fourth quarter with $3.1 billion in total cash and short-term investments (including $527 million in restricted cash and short-term investments), substantially greater than the $1.8 billion in cash and short-term investments at the close of the first quarter. From April 1 to Dec. 31, AMR's cash flow from operations totaled $1.1 billion, giving AMR greater access to the capital markets. AMR also has been able to sell some non-core assets, such as its stakes in Worldspan and Hotwire. These are the first of many steps AMR will be taking over time to repair the damage done to its balance sheet as it works to overcome its financial crisis.
Building on the added momentum of this financial improvement, American announced today a major restructuring of its hub operations at Miami that will make the hub -- American's principal gateway to Latin America -- more efficient, increase its on-time dependability, and give customers added convenience and a wider choice of flights.
The airline also announced that it will enter into a robust new codesharing partnership with Mexicana, the premier airline of Mexico.
AMR's fourth quarter results include a handful of special items -- both gains and losses -- resulting from the company's continuing restructuring efforts, a federal income tax settlement during the quarter, and gains on the sale of investments.
In addition, in keeping with the provisions of SFAS 109, AMR's fourth quarter 2003 results do not reflect a provision for federal and state income taxes. Conversely, AMR's fourth quarter 2002 results reflected a tax benefit.
To provide a better comparison between the two periods, after adjusting for these special items and taxes, the company recorded a loss (pre-tax and excluding special items) of $95 million this quarter, or $.59 per share, versus a loss (pre-tax) of $828 million, or $5.31 per share, in the fourth quarter of last year.
For the fourth quarter of 2003, AMR had operating income of $103 million, excluding special items. In the fourth quarter of 2002, AMR posted a net operating loss of $679 million.
For the full year 2003, AMR reported a net loss of $1.2 billion, or $7.76 per share, compared to a full year net loss of $3.5 billion, or $22.57 per share, in 2002. When adjusted for special items and the year-over-year tax differences mentioned above, AMR posted a 53 percent improvement in financial results, registering a full year loss of $1.5 billion in 2003 compared to a full year loss of $3.2 billion in 2002.
"The improvement in our year-over-year results is a direct result of our ongoing efforts to restructure our business and the willingness of every one of us to sacrifice and accept change as an inevitable fact of life in the airline industry," said Gerard Arpey, AMR's president and CEO.
"While the work required to make our company consistently profitable has just begun, the momentum we have created together is powerful. Perhaps the best illustration of this is the fact that we have now achieved an operating profit, excluding special items, two quarters in a row. And unlike a year ago, when we were burning through millions of dollars of cash every day, our operation is now generating positive cash flow," said Arpey.
The Miami hub restructuring and the new relationship with Mexicana will strengthen American's network and add to the company's financial progress, Arpey said.
With a combined total of more than 130 years of service between the United States and Mexico, American and Mexicana will forge a relationship that will give customers enhanced service to the most important markets in the United States and Mexico, as well as connections across their global networks. For American, it will mean new flight availability to 21 additional cities in Mexico and the ability to offer service in 27 new, nonstop transborder markets.
The relationship also includes a reciprocal frequent-flyer agreement that will allow passengers to accrue and redeem miles in Americans AAdvantage program or Mexicana's Frecuenta program on more than 500 U.S.-Mexico flights per week.
American and Mexicana will launch the partnership in April, pending governmental approval.
In Miami, the airline's principal gateway to Latin America, American will spread its operations more evenly by increasing the number of daily flight banks to 13 from seven, effective May 1. In doing so, the airline will be able to operate more flights in and out of Miami using fewer aircraft, thereby greatly increasing the hub's efficiency and assisting in the company's overall objective to lower costs.
At the same time, the restructured Miami hub will significantly enhance customer service, allowing American to offer passengers more flight choices, giving customers more time to make their flight connections, and spreading out the flow of international passengers in ways that will make it easier to clear customs and immigration processing.
Longer term, the new hub design will give American and American Eagle room to grow at Miami within the framework of the new terminal facility that is now under construction. "Miami is one of the linchpins of our global network," Arpey said. "And this initiative will enable us to operate more flights in and out of that hub -- using fewer aircraft -- reduce costs, and relieve some of the pressure that hub has been under from the ongoing terminal construction project."
At the heart of AMR's financial progress in 2003, Arpey said, were the strides it made toward achieving the company's critical goal of $4 billion in annual capacity-independent cost savings.
These efforts were given a huge boost when employees agreed to a restructuring that added $1.8 billion a year in labor-cost savings to savings of $2 billion a year from strategic initiatives and another $200 million from vendors, suppliers and creditors.
"Lower costs go hand in hand with our ability to protect and build on our leading share in the marketplace," Arpey said. "Today, thanks to the sacrifices, hard work and ingenuity of American's people, our costs -- while still not as low as our low-cost competitors -- are continuing to improve to help us compete vigorously for every customer."
Although unquestionably pleased by its progress, Arpey said AMR is not yet satisfied with its financial results and recognizes that it still has lots of work in front of it.
"We've made great progress," Arpey said, "but we also realize the many challenges that lie ahead."
Arpey pointed to the following progress in each of the four tenets of the AMR Turnaround Plan:
Lower Costs To Compete: This is where AMR has made its most dramatic progress, underscored by an 11.9 percent decline in unit costs in the fourth quarter, excluding special items and regional affiliates. If not for rising fuel prices, AMR's progress would have been even more dramatic, with a year-over-year drop in unit costs of 12.8 percent. To further reduce costs, AMR has returned underused gate space, consolidated terminal space, depeaked its Chicago and Dallas/Fort Worth hub schedules (now adding Miami to that list), closed a reservations center, reduced the size of the St. Louis hub, accelerated the retirement of TWA aircraft, and improved aircraft utilization across the fleet.
Fly Smart, Give Customers What They Value: This tenet focuses on customer service and revenue production, with emphasis on improving AMR's relative revenue performance. Key moves in this area are adding seats to American's 757 and A300 fleets and restructuring the mid-continent hubs at Chicago, DFW and St. Louis (next up, Miami). Another step is expanding alliances. Progress here includes a domestic codeshare with Alaska Airlines, approval of codesharing with British Airways, the addition of SWISS International to the oneworld alliance, and (as announced today) the new codeshare linkage with Mexicana.
Pull Together, Win Together: Fostering greater cooperation than ever between the company and employees, AMR has adopted an unprecedented level of openness with employee groups and labor unions. Arpey holds regular Town Hall-style meetings with employees, AMR's chief financial officer meets monthly with union leaders to walk them through the company's financial results in the same way he briefs AMR's Board, and the Overland Group, a firm expert in bringing union groups and management together, has been engaged to help all parties within AMR move to a philosophy of active involvement. On Jan. 28 and 29, American will conduct its first Customer Strategy meeting with frontline employees to advance this process and improve the customer experience.
Build A Financial Foundation For The Future: AMR ended the fourth quarter with $3.1 billion in total cash and short-term investments (including $527 million in restricted cash and short-term investments), substantially greater than the $1.8 billion in cash and short-term investments at the close of the first quarter. From April 1 to Dec. 31, AMR's cash flow from operations totaled $1.1 billion, giving AMR greater access to the capital markets. AMR also has been able to sell some non-core assets, such as its stakes in Worldspan and Hotwire. These are the first of many steps AMR will be taking over time to repair the damage done to its balance sheet as it works to overcome its financial crisis.
