AMR Corp. (AMR), parent of American Airlines, stands ready to cut more capacity if the travel picture remains weak.

Published: 17 Jul 2009

AMR Corp. (AMR), parent of American Airlines, stands ready to cut more capacity if the travel picture remains weak.

The company reported a $390 million second-quarter loss as collapsing travel demand continued to erase gains from lower fuel costs. It said second-quarter revenue fell 21 percent to $4.89 billion from a year earlier.

Ticket bookings for the remainder of the third quarter are down 1.5 percent, the airline said Wednesday.

“We now expect mainline capacity in the second half of 2009 to be lower by over 12 percent versus the same period in 2007, comprised of a domestic reduction of about 15.5 percent and international pulldown of about 5.5%, and we will continue to monitor the revenue environment to see if more must be done,” said Gerard Arpey, chairman and chief executive, said.

The company expects full year mainline system capacity to be down about 7.5 percent versus 2008, and mainline domestic capacity for the year to decrease about 9 percent, and mainline international to be down over 4 percent.

Arpey said there’s no reason to think that capacity can be restored next year.

A sharp decline in business travel, more severe than the falloff in leisure business, seems to have leveled off, although there's no sign of improvement. Arpey said he thinks some companies now see that business travel is necessary and are restoring more of their travel budgets.

Forecast

American Airlines Inc. is possibly set to benefit from lower jet fuel prices and a global joint venture with British Airways should the government grant anti-trust immunity for American to forge ahead with the British Airways partnership, according to a new report from Michael Derchin, an analyst with FTN Equity Capital Markets Corp.

Derchin upgraded his expectations for Fort Worth-based American and now anticipates the airline will report only a loss of $4.41 per share for the 2009 fiscal year, which is improved from Derchin's previous estimate of a $5.20 per share net loss for the year.