johnsonrod
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Could this lead to a USAirways acquisition down the road? What about the JAL investment? Adding flying with the new 737s?
AMR Raises $2.9 Billion, Shifts Flights to Boost Hubs (Update3)
By Mary Schlangenstein
Sept. 17 (Bloomberg) -- AMR Corp.’s American Airlines, the world’s second-largest carrier, said it raised $2.9 billion in cash and financing and will add flying at four U.S. hubs to focus on the most-profitable parts of its network.
AMR rose the most in 11 months in New York trading. Credit- card partner Citigroup Inc. paid $1 billion for frequent-flier miles, and GE Capital Aviation Services provided $1.6 billion in jet-financing commitments, American said today in a statement.
The cash will bolster liquidity for Fort Worth, Texas-based AMR before winter in the U.S., when travel typically slows and carriers tap their reserves to fund operations. The recession has sapped demand for higher-fare business travel, dragging the biggest U.S. carriers to losses.
“There are signs of improvement in the revenue environment and in consumer sentiment, but the winter season is still potentially a challenging one,” said Douglas Runte, managing director at Piper Jaffray & Co. in New York, who doesn’t rate AMR. “This liquidity raising is an important move.”
The shares jumped $1.66, or 23 percent, to $9.01 at 9:44 a.m. in New York Stock Exchange composite trading. They reached $9.05 for the biggest intraday advance since Oct. 16. AMR tumbled 31 percent this year through yesterday.
AMR had $3.3 billion in cash and short-term investments as of June 30, including $460 million dedicated to specific uses.
Hub Flights
American said flights will increase from the hubs at Chicago, New York, Dallas-Fort Worth and Miami, and some regional jets will get first-class cabins. The carrier also will purchase 22 70-seat Bombardier Inc. planes.
Daily departures for mainline jets and regional carrier American Eagle will drop by 46 at St. Louis and 9 at Raleigh/Durham, North Carolina, American said. The carrier said it’s still assessing how many employees will be affected.
Capacity in American’s main jet operations will increase 1 percent next year over 2009, the carrier said. Domestic markets will be unchanged, while available seating on international flights, typically the most profitable routes for airlines, will rise 2.5 percent.
The GE Capital Aviation Services agreement will provide funding for Boeing Co. 737-800s American will add through 2011 by letting the airline sell the jets to the General Electric Co. unit and lease them back. The planes are 25 percent more fuel efficient than the MD-80s they will replace.
GE’s Role
Boeing 737s use only CFM engines, built by GE’s jet-engine manufacturing venture with Safran SA of France. Fairfield, Connecticut-based GE is the world’s biggest maker of jet engines and the largest aircraft lessor by the number of planes.
The new GE financing also includes $280 million in cash under a loan accord. American put up 10 aircraft as collateral for $225 million of that funding, and will pledge 3 more planes as security next month to tap the remaining $55 million.
“The fact that we have been able to raise the money we need, both to sustain us through this economic contraction and to invest in our future, is an important vote of confidence by the capital markets and our business partners,” Chief Executive Officer Gerard Arpey said today in a message to employees.
American is at least the fifth major U.S. airline since 2008 to raise funds by selling frequent-flier points to credit- card issuers. The miles are distributed as awards for purchases.
Frequent-Flier Miles
Citigroup can use the miles, which were bought in a so- called advance purchase, in equal monthly installments from 2012 through 2016. The agreement also extends its co-branded credit- card program with American.
Delta Air Lines Inc., the world’s biggest carrier, and UAL Corp.’s United,
Continental Airlines Inc. and US Airways Group Inc. all agreed last year to advance sales of frequent-flier miles to credit- card partners. The carriers raised sums ranging from $200 million to $1 billion. American didn’t disclose a cost to add first-class cabins to its fleet of Bombardier CRJ700s, allowing the airline to charge higher fares and compete with United Airlines, which sells the premium tickets on its 70-seat planes from Chicago. American will begin accepting the 22 new CRJ700s in 2010.
The route changes for American and American Eagle will include the addition of 57 daily flights and 12 destinations in 2010 from Chicago’s O’Hare Airport. The airline will add 23 daily departures from Miami, 19 from Dallas-Fort Worth, 7 from John F. Kennedy airport in New York, 2 at New York’s LaGuardia and 2 at Los Angeles.
Expanding international capacity and adding service such as Chicago-Beijing is a bet on a recovery in travel demand.
U.S.-based carriers slashed flight capacity in 2008 and this year, first in response to record fuel prices and then to better match supply as corporate and leisure business dwindled.
To contact the reporter on this story: Mary Schlangenstein in Dallas at [email protected]
AMR Raises $2.9 Billion, Shifts Flights to Boost Hubs (Update3)
By Mary Schlangenstein
Sept. 17 (Bloomberg) -- AMR Corp.’s American Airlines, the world’s second-largest carrier, said it raised $2.9 billion in cash and financing and will add flying at four U.S. hubs to focus on the most-profitable parts of its network.
AMR rose the most in 11 months in New York trading. Credit- card partner Citigroup Inc. paid $1 billion for frequent-flier miles, and GE Capital Aviation Services provided $1.6 billion in jet-financing commitments, American said today in a statement.
The cash will bolster liquidity for Fort Worth, Texas-based AMR before winter in the U.S., when travel typically slows and carriers tap their reserves to fund operations. The recession has sapped demand for higher-fare business travel, dragging the biggest U.S. carriers to losses.
“There are signs of improvement in the revenue environment and in consumer sentiment, but the winter season is still potentially a challenging one,” said Douglas Runte, managing director at Piper Jaffray & Co. in New York, who doesn’t rate AMR. “This liquidity raising is an important move.”
The shares jumped $1.66, or 23 percent, to $9.01 at 9:44 a.m. in New York Stock Exchange composite trading. They reached $9.05 for the biggest intraday advance since Oct. 16. AMR tumbled 31 percent this year through yesterday.
AMR had $3.3 billion in cash and short-term investments as of June 30, including $460 million dedicated to specific uses.
Hub Flights
American said flights will increase from the hubs at Chicago, New York, Dallas-Fort Worth and Miami, and some regional jets will get first-class cabins. The carrier also will purchase 22 70-seat Bombardier Inc. planes.
Daily departures for mainline jets and regional carrier American Eagle will drop by 46 at St. Louis and 9 at Raleigh/Durham, North Carolina, American said. The carrier said it’s still assessing how many employees will be affected.
Capacity in American’s main jet operations will increase 1 percent next year over 2009, the carrier said. Domestic markets will be unchanged, while available seating on international flights, typically the most profitable routes for airlines, will rise 2.5 percent.
The GE Capital Aviation Services agreement will provide funding for Boeing Co. 737-800s American will add through 2011 by letting the airline sell the jets to the General Electric Co. unit and lease them back. The planes are 25 percent more fuel efficient than the MD-80s they will replace.
GE’s Role
Boeing 737s use only CFM engines, built by GE’s jet-engine manufacturing venture with Safran SA of France. Fairfield, Connecticut-based GE is the world’s biggest maker of jet engines and the largest aircraft lessor by the number of planes.
The new GE financing also includes $280 million in cash under a loan accord. American put up 10 aircraft as collateral for $225 million of that funding, and will pledge 3 more planes as security next month to tap the remaining $55 million.
“The fact that we have been able to raise the money we need, both to sustain us through this economic contraction and to invest in our future, is an important vote of confidence by the capital markets and our business partners,” Chief Executive Officer Gerard Arpey said today in a message to employees.
American is at least the fifth major U.S. airline since 2008 to raise funds by selling frequent-flier points to credit- card issuers. The miles are distributed as awards for purchases.
Frequent-Flier Miles
Citigroup can use the miles, which were bought in a so- called advance purchase, in equal monthly installments from 2012 through 2016. The agreement also extends its co-branded credit- card program with American.
Delta Air Lines Inc., the world’s biggest carrier, and UAL Corp.’s United,
Continental Airlines Inc. and US Airways Group Inc. all agreed last year to advance sales of frequent-flier miles to credit- card partners. The carriers raised sums ranging from $200 million to $1 billion. American didn’t disclose a cost to add first-class cabins to its fleet of Bombardier CRJ700s, allowing the airline to charge higher fares and compete with United Airlines, which sells the premium tickets on its 70-seat planes from Chicago. American will begin accepting the 22 new CRJ700s in 2010.
The route changes for American and American Eagle will include the addition of 57 daily flights and 12 destinations in 2010 from Chicago’s O’Hare Airport. The airline will add 23 daily departures from Miami, 19 from Dallas-Fort Worth, 7 from John F. Kennedy airport in New York, 2 at New York’s LaGuardia and 2 at Los Angeles.
Expanding international capacity and adding service such as Chicago-Beijing is a bet on a recovery in travel demand.
U.S.-based carriers slashed flight capacity in 2008 and this year, first in response to record fuel prices and then to better match supply as corporate and leisure business dwindled.
To contact the reporter on this story: Mary Schlangenstein in Dallas at [email protected]