Big Slick
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AMR Corporation Reports a First Quarter Profit of $81 Million, a $173 Million Improvement Year Over Year
Despite Weather Impact, Company Continues Momentum With Fourth Consecutive Profitable Quarter AMR Strengthens Balance Sheet, Improves Liquidity and Continues to Reinvest in its Products and Services
FORT WORTH, Texas, April 18 /PRNewswire-FirstCall/ -- AMR Corporation AMR, the parent company of American Airlines, Inc., today reported a net profit of $81 million for the first quarter of 2007, or $0.30 per diluted share.
The current quarter results compare to a net loss of $92 million, or $0.49 per diluted share, in the first quarter of 2006.
"In spite of significant weather challenges, we continued to build on our momentum by generating a profit in the first quarter. This is our fourth consecutive profitable quarter and the first time we have generated a profit in the first quarter since 2000," said AMR Chairman and CEO Gerard Arpey. "We strengthened our balance sheet and liquidity, took a key step in our fleet renewal plan and reinvested in our products and services. While we must continue to improve our financial performance, we believe our results show that we have started 2007 on the right track."
Operational Performance
American's mainline passenger revenue per available seat mile (unit revenue) increased by 4.5 percent in the first quarter compared to the year-ago quarter. Mainline capacity, or total available seat miles, in the first quarter decreased 2.5 percent compared to the same period in 2006.
American's mainline load factor -- or the percentage of total seats filled -- was a record 78.1 percent during the first quarter, compared to 77.2 percent in the first quarter of 2006. American's first-quarter yield, which represents average fares, increased 3.3 percent compared to the first quarter of 2006, its eighth consecutive quarter of year-over-year yield increases.
AMR reported first quarter consolidated revenues of approximately $5.4 billion, an increase of 1.6 percent year over year. AMR estimates that severe weather disruptions reduced first quarter consolidated revenue by approximately $60 million.
American's mainline cost per available seat mile (unit cost) in the first quarter was up 0.9 percent year over year, which was 1.6 percentage points higher than originally anticipated largely because of weather impacts that caused American to cancel 2.9 percent of mainline scheduled departures for the first quarter. Excluding fuel, mainline unit costs in the first quarter increased by 2.2 percent year over year.
Balance Sheet Improvement
Arpey noted that AMR continued to strengthen its balance sheet in the first quarter by reducing debt and improving its liquidity position.
AMR ended the first quarter with $5.9 billion in cash and short-term investments, including a restricted balance of $471 million, compared to a balance of $4.8 billion in cash and short-term investments, including a restricted balance of $510 million, at the end of the first quarter of 2006.
AMR reduced Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax- exempt bonds and the present value of aircraft operating lease obligations, to $17.5 billion at the end of the first quarter of 2007, compared to $19.7 billion a year earlier. AMR reduced Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, from $15.4 billion at the end of the first quarter of 2006 to $12.2 billion in the first quarter of 2007.
AMR contributed $62 million to its employees' defined benefit pension plans in the first quarter and made an additional $118 million contribution on April 13, as the Company continues to meet this important commitment to its employees.
"As we continue to execute on our Turnaround Plan, we are seeking to strike the right balance between reinvestment in the business and the need for further financial improvement," Arpey said. "We have more hard work ahead of us, but we believe that we have the right strategy in place to continue building our company for the long term and to continue delivering benefits to shareholders, customers and employees."
First Quarter Highlights
-- American announced that it had notified Boeing of its intent to begin pulling forward deliveries of 47 737-800 aircraft to replace a portion of its MD-80 fleet, with the first three aircraft scheduled for delivery in early 2009. Arpey cited the fleet renewal announcement as a key step toward American's goal of improving fleet fuel efficiency by more than 20 percent by 2020.
-- American announced that it would invest up to $100 million in facility, technology and process improvements to help its Maintenance, Repair and Overhaul (MRO) business compete for more third-party maintenance contracts. American's MRO business generated nearly $95 million in third-party revenue in 2006.
-- AMR continued to improve its balance sheet by paying down the $285 million balance on its revolving credit facility and by prepaying $79 million in aircraft debt. In April, the Company also completed the refinancing of $350 million of tax-exempt bonds. These actions are expected to eliminate approximately $15 million in annual net interest expense for the Company.
-- AMR improved its financial strength by selling 13 million new shares of common stock to raise nearly $500 million.
-- AMR was honored by PLANSPONSOR Magazine as Corporate Plan Sponsor of the Year for the Company's efforts to protect and preserve its employees' defined benefit pension plans. In addition to contributing more than $1.5 billion to its employees' defined benefit pension plans since 2002, the Company expects to contribute $364 million to these plans in 2007. Through April 13, AMR had made $180 million of its expected 2007 contributions.
-- AMR began to accrue for a potential profit sharing payout to employees for the 2007 year, payable in 2008. There can be no assurance that the Company's forecast will approximate actual results, which are dependent upon many factors, including fuel prices and economic and industry conditions.
-- American launched an initiative to become the clear airline of choice for passengers in the New York market, with its commitment demonstrated by additional routes, enhanced offers and promotions.
-- American launched a new online booking tool on AA.com that makes it easier and more convenient for AAdvantage program members to redeem earned miles for travel.
-- American announced that it began installing new personal video and audio entertainment devices in Business Class cabins on its 58 Boeing 767-300 aircraft.
Guidance for the Second Quarter and 2007
Mainline and Consolidated Capacity
AMR expects its full-year mainline capacity to decrease by 1.8 percent in 2007 compared to 2006, with a 2.0 percent reduction in domestic capacity and a 0.9 percent decrease in international capacity. On a consolidated basis, AMR expects full-year capacity to decrease by 1.5 percent in 2007 compared to 2006. The impact of weather-related cancellations that occurred in the first quarter is included in mainline and consolidated capacity forecasts for 2007.
AMR expects mainline capacity in the second quarter of 2007 to decrease by 3.1 percent year over year. It expects consolidated capacity to decrease by 2.9 percent in the second quarter of 2007 compared to the prior-year period.
Fuel Expense and Hedging
While the cost of jet fuel remains volatile, as of now AMR is planning for an average system price of $2.09 per gallon in the second quarter and $2.09 per gallon for all of 2007. AMR has 34 percent of its anticipated second quarter fuel consumption capped at an average crude equivalent of $65 per barrel (jet fuel equivalent of $2.04 per gallon), with 26 percent of its anticipated full-year consumption capped at an average crude equivalent of $63 per barrel (jet fuel equivalent of $1.96 per gallon). Consolidated consumption for the second quarter is expected to be 791 million gallons of jet fuel.
Mainline and Consolidated Unit Costs
AMR continues to target $300 million in incremental savings for 2007. It expects mainline unit costs excluding fuel to be 1.1 percent higher in 2007 versus 2006 while 2007 consolidated unit costs excluding fuel are expected to increase 1.6 percent year over year.
In the second quarter, mainline unit costs excluding fuel are expected to increase 2.8 percent year over year while consolidated unit costs excluding fuel are expected to increase 3.1 percent from the second quarter of 2006.
Following the weather impact in the first quarter, full-year mainline unit costs are expected to increase 1.6 percent in 2007 compared to 2006, while full-year consolidated unit costs are expected to increase 2.0 percent in 2007 compared to 2006. For the second quarter, mainline unit costs are expected to increase 2.1 percent compared to the second quarter of 2006, while second quarter consolidated unit costs are expected to increase 2.1 percent compared to the second quarter of 2006.
Despite Weather Impact, Company Continues Momentum With Fourth Consecutive Profitable Quarter AMR Strengthens Balance Sheet, Improves Liquidity and Continues to Reinvest in its Products and Services
FORT WORTH, Texas, April 18 /PRNewswire-FirstCall/ -- AMR Corporation AMR, the parent company of American Airlines, Inc., today reported a net profit of $81 million for the first quarter of 2007, or $0.30 per diluted share.
The current quarter results compare to a net loss of $92 million, or $0.49 per diluted share, in the first quarter of 2006.
"In spite of significant weather challenges, we continued to build on our momentum by generating a profit in the first quarter. This is our fourth consecutive profitable quarter and the first time we have generated a profit in the first quarter since 2000," said AMR Chairman and CEO Gerard Arpey. "We strengthened our balance sheet and liquidity, took a key step in our fleet renewal plan and reinvested in our products and services. While we must continue to improve our financial performance, we believe our results show that we have started 2007 on the right track."
Operational Performance
American's mainline passenger revenue per available seat mile (unit revenue) increased by 4.5 percent in the first quarter compared to the year-ago quarter. Mainline capacity, or total available seat miles, in the first quarter decreased 2.5 percent compared to the same period in 2006.
American's mainline load factor -- or the percentage of total seats filled -- was a record 78.1 percent during the first quarter, compared to 77.2 percent in the first quarter of 2006. American's first-quarter yield, which represents average fares, increased 3.3 percent compared to the first quarter of 2006, its eighth consecutive quarter of year-over-year yield increases.
AMR reported first quarter consolidated revenues of approximately $5.4 billion, an increase of 1.6 percent year over year. AMR estimates that severe weather disruptions reduced first quarter consolidated revenue by approximately $60 million.
American's mainline cost per available seat mile (unit cost) in the first quarter was up 0.9 percent year over year, which was 1.6 percentage points higher than originally anticipated largely because of weather impacts that caused American to cancel 2.9 percent of mainline scheduled departures for the first quarter. Excluding fuel, mainline unit costs in the first quarter increased by 2.2 percent year over year.
Balance Sheet Improvement
Arpey noted that AMR continued to strengthen its balance sheet in the first quarter by reducing debt and improving its liquidity position.
AMR ended the first quarter with $5.9 billion in cash and short-term investments, including a restricted balance of $471 million, compared to a balance of $4.8 billion in cash and short-term investments, including a restricted balance of $510 million, at the end of the first quarter of 2006.
AMR reduced Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax- exempt bonds and the present value of aircraft operating lease obligations, to $17.5 billion at the end of the first quarter of 2007, compared to $19.7 billion a year earlier. AMR reduced Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, from $15.4 billion at the end of the first quarter of 2006 to $12.2 billion in the first quarter of 2007.
AMR contributed $62 million to its employees' defined benefit pension plans in the first quarter and made an additional $118 million contribution on April 13, as the Company continues to meet this important commitment to its employees.
"As we continue to execute on our Turnaround Plan, we are seeking to strike the right balance between reinvestment in the business and the need for further financial improvement," Arpey said. "We have more hard work ahead of us, but we believe that we have the right strategy in place to continue building our company for the long term and to continue delivering benefits to shareholders, customers and employees."
First Quarter Highlights
-- American announced that it had notified Boeing of its intent to begin pulling forward deliveries of 47 737-800 aircraft to replace a portion of its MD-80 fleet, with the first three aircraft scheduled for delivery in early 2009. Arpey cited the fleet renewal announcement as a key step toward American's goal of improving fleet fuel efficiency by more than 20 percent by 2020.
-- American announced that it would invest up to $100 million in facility, technology and process improvements to help its Maintenance, Repair and Overhaul (MRO) business compete for more third-party maintenance contracts. American's MRO business generated nearly $95 million in third-party revenue in 2006.
-- AMR continued to improve its balance sheet by paying down the $285 million balance on its revolving credit facility and by prepaying $79 million in aircraft debt. In April, the Company also completed the refinancing of $350 million of tax-exempt bonds. These actions are expected to eliminate approximately $15 million in annual net interest expense for the Company.
-- AMR improved its financial strength by selling 13 million new shares of common stock to raise nearly $500 million.
-- AMR was honored by PLANSPONSOR Magazine as Corporate Plan Sponsor of the Year for the Company's efforts to protect and preserve its employees' defined benefit pension plans. In addition to contributing more than $1.5 billion to its employees' defined benefit pension plans since 2002, the Company expects to contribute $364 million to these plans in 2007. Through April 13, AMR had made $180 million of its expected 2007 contributions.
-- AMR began to accrue for a potential profit sharing payout to employees for the 2007 year, payable in 2008. There can be no assurance that the Company's forecast will approximate actual results, which are dependent upon many factors, including fuel prices and economic and industry conditions.
-- American launched an initiative to become the clear airline of choice for passengers in the New York market, with its commitment demonstrated by additional routes, enhanced offers and promotions.
-- American launched a new online booking tool on AA.com that makes it easier and more convenient for AAdvantage program members to redeem earned miles for travel.
-- American announced that it began installing new personal video and audio entertainment devices in Business Class cabins on its 58 Boeing 767-300 aircraft.
Guidance for the Second Quarter and 2007
Mainline and Consolidated Capacity
AMR expects its full-year mainline capacity to decrease by 1.8 percent in 2007 compared to 2006, with a 2.0 percent reduction in domestic capacity and a 0.9 percent decrease in international capacity. On a consolidated basis, AMR expects full-year capacity to decrease by 1.5 percent in 2007 compared to 2006. The impact of weather-related cancellations that occurred in the first quarter is included in mainline and consolidated capacity forecasts for 2007.
AMR expects mainline capacity in the second quarter of 2007 to decrease by 3.1 percent year over year. It expects consolidated capacity to decrease by 2.9 percent in the second quarter of 2007 compared to the prior-year period.
Fuel Expense and Hedging
While the cost of jet fuel remains volatile, as of now AMR is planning for an average system price of $2.09 per gallon in the second quarter and $2.09 per gallon for all of 2007. AMR has 34 percent of its anticipated second quarter fuel consumption capped at an average crude equivalent of $65 per barrel (jet fuel equivalent of $2.04 per gallon), with 26 percent of its anticipated full-year consumption capped at an average crude equivalent of $63 per barrel (jet fuel equivalent of $1.96 per gallon). Consolidated consumption for the second quarter is expected to be 791 million gallons of jet fuel.
Mainline and Consolidated Unit Costs
AMR continues to target $300 million in incremental savings for 2007. It expects mainline unit costs excluding fuel to be 1.1 percent higher in 2007 versus 2006 while 2007 consolidated unit costs excluding fuel are expected to increase 1.6 percent year over year.
In the second quarter, mainline unit costs excluding fuel are expected to increase 2.8 percent year over year while consolidated unit costs excluding fuel are expected to increase 3.1 percent from the second quarter of 2006.
Following the weather impact in the first quarter, full-year mainline unit costs are expected to increase 1.6 percent in 2007 compared to 2006, while full-year consolidated unit costs are expected to increase 2.0 percent in 2007 compared to 2006. For the second quarter, mainline unit costs are expected to increase 2.1 percent compared to the second quarter of 2006, while second quarter consolidated unit costs are expected to increase 2.1 percent compared to the second quarter of 2006.
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