AMR posts $45 million profit, thanks to sale of unit
[SIZE=-1]10:50 PM CDT on Thursday, October 23, 2008
[SIZE=-1]By TERRY MAXON firstname.lastname@example.org [/SIZE]
AMR Corp. wouldn't argue that it had a good third quarter.
Even so, with net income of $45 million, the parent of American Airlines Inc. was the only airline company among the nation's 10 largest to report a profit in the third quarter.
The catch: It used a $432 million gain from selling its financial unit, American Beacon Advisors, to more than wipe out its losses. Without that sale, AMR would have lost $360 million.
An AMR spokesman wasn't particularly excited about AMR's unique status, considering that it was the result of a one-time item.
In fact, the whole airline world seems to be caught up in accounting issues, as profits are really losses and some losses are really profits.
Several airlines that lost money would have reported profits except for noncash accounting charges, primarily for fuel hedges. The market value of their fuel hedging investments declined as energy prices went down during the quarter, and they had to show that decrease on their financial reports.
Southwest Airlines Co., whose $120 million loss was its first quarterly loss since first quarter 1991, would have earned $69 million if not for the hedging impact and other special items.
Northwest Airlines Inc. lost $317 million for the three months ended Sept. 30. Take out a $410 million charge to account for the decreased value of its fuel hedges, and it would have earned $93 million, the carrier says.
Alaska Air Group Inc., one of four major U.S. airlines to report losses Thursday, recorded a $218 million charge on its fuel hedging positions, in a quarter in which it lost $86.5 million.
Almost all of the fuel hedge losses came because companies are required to determine the change in the value of their hedges during the quarter, a "mark-to-market" requirement.
For some, the mark-to-market losses in the third quarter reversed mark-to-market gains they recorded in the second quarter as fuel prices were soaring.
As Alaska Air officials noted Thursday, their $218 million mark-to-market charge followed a $155 million gain in the second quarter. Southwest's third-quarter charge followed a $369 million second-quarter gain.
In all, the large carriers had to take $2 billion in third-quarter charges because of fuel hedging, which made up the bulk of their $2.5 billion collective loss.
FLYING LOW: THIRD-QUARTER AIRLINE INDUSTRY EARNINGS
Among the nation's top 10 airlines, only AMR, parent of American Airlines, showed a net profit in the third quarter. Here's how the group performed in the three months ended Sept. 30 compared with the same period in 2007 (all figures in millions of dollars): Airline 3Q '08 3Q '07 Change AMR $45 $175 - $130 AirTran -$107 $11 -$118 Alaska -$87 $82 - $168 Continental -$236 $241 - $477 Delta -$50 $220 -$270 JetBlue -$4 $23 -$27 Northwest -$317 $244 -$561 Southwest -$120 $162 - $282 UAL -$779 $334 - $1,113 US Airways -$865 $177 -$1,042 Total -$2,520 $1,668 - $4,188 NOTE: Numbers may not add up because of rounding. SOURCES: Airlines; Dallas Morning News research