STRANGE!
Now they have $3.3 BILLION in cash????
AMR Reports Break-Even 3Q Results
AMR Posts Third-Quarter Operating Earnings
Of $165 Million And Net Earnings Of $1 Million
Excluding Special Items, AMR Reports Operating Earnings
Of $141 Million And A Modest Net Loss Of $23 Million
Airline Ends Quarter With $3.3 Billion In Total Cash And Short-Term Investments
AMR's Four-Point Turnaround Plan On Track
In Drive For Sustained Profitability At Acceptable Levels
Continuing to build financial momentum, AMR Corporation, the parent company of American Airlines, Inc., today reported operating earnings of $165 million and net earnings of $1 million for the third quarter. In last year's third quarter, AMR reported an operating loss of $1.3 billion and a net loss of $924 million, or $5.93 per share.
Both this year's quarter and last year's third quarter included special items - both gains and losses - resulting mostly from the company's restructuring efforts. In addition, in keeping with the provisions of SFAS 109, AMR's third quarter 2003 results do not reflect a provision for federal and state income taxes.
Conversely, AMR's third 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 of $23 million this quarter, or $0.15 per share, versus a loss of $741 million, or $4.76 per share, in the third quarter of last year.
"We are making good progress under the focus and discipline of our four-point Turnaround Plan," said Gerard Arpey, AMR's president and CEO. "Nevertheless, the third quarter is a peak season for the airline industry, and under normal circumstances, we should be doing much better at this time of year than simply breaking even. We have a lot of work to do to achieve sustained profitability at acceptable levels, but we are clearly on the right track.
"When you look at everything we have had to overcome and compare our results in the third quarter with the huge losses in the same period last year," Arpey said, "the progress is very gratifying. Our third quarter performance is unmistakable evidence that we are building critical momentum on the cost side of the business and that those improvements, coupled with other aspects of the Turnaround Plan, are beginning to produce significant financial results.
"Most especially, AMR has been aided over the past several months by the sacrifices and hard work of our employees, who have rallied behind the Pull Together, Win Together tenet of the Turnaround Plan to help us overcome our financial crisis and take good care of our customers under some very challenging circumstances," Arpey said.
Third quarter highlights included:
An 8.1 percent increase in American's mainline unit revenues, reflecting record load factors in July and August.
An 8.6 percent decrease in American's mainline unit costs (excluding special items), despite a 6.3 percent drop in capacity and higher fuel prices.
A strong Sept. 30 cash and short-term investment balance of $3.3 billion (including $540 million in restricted cash and short-term investments), more than double the low of $1.6 billion last April.
Improved access to the capital markets, underscored by a $300 million convertible debt transaction closed in September.
Cash contributions of $173 million to the company's pension plans, bringing the year's total pension contributions to more than $300 million.
One of the biggest challenges facing AMR, Arpey said, is an uncertain revenue environment. There was an encouraging year-over-year increase in quarterly yield, the first such increase since the first quarter of 2001. American's third quarter yield was 11.63 cents, up 2.5 percent from a yield of 11.35 cents in the same period a year ago. But overall, the revenue environment is disappointing, Arpey said, and is negating much of the progress being made in lowering AMR's costs. This, he said, makes all the more important the cost principles of AMR's Turnaround Plan, aimed at lowering the company's costs so it can compete effectively in an industry marked by ever-expanding low-cost competition.
Still, Arpey said, AMR remains confident as it continues to implement initiatives throughout this year and in 2004 that should have a positive effect on the company's financial performance. For example:
In 2004, American will benefit for the entire year from the revenueand cost improvements associated with the realignment of its mid-continent hubs at Chicago, Dallas/Fort Worth and St. Louis.
American has just begun adding back coach seats on its Boeing757 and Airbus A300 fleets, both of which will be assigned topredominantly leisure markets. These steps, and the reconfiguration of its Boeing 767-300s and 737-800s, should increase American's passenger revenue in 2004.
The recent launch of American's codeshare service with British Airways
and the addition of SWISS International to the oneworld alliance will expand American's network and revenue opportunities in the fourth quarter and beyond.
American today announced an understanding with Kansas City andthe state of Missouri that retains portions of AA's Kansas City maintenance base and completes plans for the more efficient allocation of work among the airline's three maintenance bases, giving the company $100 million in incentives from the base communities and on-going operating efficiencies.
American's position is enhanced by the focused efforts of its employees as they pull together and win together, sharing in the value they help create through the 38 million employee stock options issued earlier this year.
Continued implementation of AMR's $2 billion in strategic initiatives. These include completing the simplification of AMR's fleet from 14 to 6 aircraft types when the last F-100 is retired in September, and rolling out more self-service alternatives for customers at airports and on-line.
A recent partnership with American Express to issue a co-branded American Express Business ExtrAA Corporate Card that offers rebates and rewards, at the corporate level, for air travel spending on American.
Continued emphasis on customer service was recognized at the 10th Annual World Travel Awards, where American was named North America's Leading Airline for the sixth straight year and also won for World's Leading Economy Class and World's Leading Airline Internet Site.
"These and other steps will give us added financial impetus in 2004 that we will use to build on the momentum we are gathering this year," Arpey said. "We have begun a recovery process that should be helped substantially in 2004 by many of the initiatives now underway."
