American Airlines doesn't need to take part in a big merger to stay
competitive in an industry set to be transformed by consolidation, the chief
executive of its parent company said on Wednes Speaking after AMR
reported a hefty quarterly loss due to skyrocketing fuel costs, Gerard Arpey
said the No.
 1 US airline has not decided what its role in a consolidated
industry might be, two days after Delta Air Lines announced its plan to buy
rival Northwest Airlines. "We're fortunate to have a very strong
network regardless of any consolidation that may or may not take place in the
industry," Arpey said. "We may or may not participate in
consolidation," Arpey added. He said, however, that the airline would be
alert to opportunities to buy assets that could be sold during the merger of
rivals.
AMR on Wednesday reported a first-quarter loss as the company grappled with
the soaring fuel prices that have walloped the industry overall. Those
rising costs combined with a weak economy helped prompt the proposed
Delta/Northwest deal on Monday and could spur a wave of further consolidation
amid fears of falling travel demand. AMR said it would cut capacity and
accelerate its fleet renewal plan in hopes of boosting revenue and cost
savings. Its shares gained 10 percent after an 8 percent sell-off on Tuesday,
but pared those gains later in the day. "The first quarter proved
yet again that fuel prices remain one the of the biggest threats to our
industry and our company, and we also can't ignore the ongoing concerns about
the US economy and the potential impact on travel demand," said Arpey in
a statement.
AMR is still smarting from last week's public relations debacle when it
canceled 3,000 flights for maintenance checks. Arpey apologized again to
passengers who were affected. The impact of the crisis will not be clear
until the release of second-quarter results, although Chief Financial Officer
Tom Horton reiterated that the cancellations probably would cost the airline
"tens of millions" of dollars.
The carrier's first-quarter loss amounted to $328 million, compared with a
profit of $81 million a year earlier. Revenue rose to $5.7 billion from
$5.4 billion a year earlier. AMR ended the quarter with $4.9 billion in cash
and short-term investments. AMR shares closed Wednesday 4.1 percent
higher at $8.92 on the New York Stock Exchange. Jet fuel was by far the
carrier's biggest expense in the quarter. AMR paid $2.1 billion for fuel,
$2.74 per gallon, which is a 48 percent increase over the same quarter a year
earlier. The company predicted a fuel price of $3.01 per gallon for the second
quarter. The airline industry has been hit this year by high fuel
prices, which are directly related to the price of oil. Nymex crude oil
notched a record high above $115 a barrel on Wednesday. American and
other major carriers have attempted to offset this burden by raising ticket
prices, although fare increases have not kept pace with rising fuel prices.
The carrier said it planned to reduce its 2008 mainline capacity by 1.4
percent for the year. It would cut domestic capacity by 3.6 percent and
increase capacity on lucrative international routes by 2.5 percent.
Additionally, AMR said it will speed the replacement of its aging, thirsty
MD-80 aircraft with more fuel-efficient Boeing 737-800s. The company expects
to take delivery of 34 737s in 2009 and 36 737s in 2010.
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