American Airlines parent AMR Corp. reports $505 million first-quarter loss

AMR reports $505 million first-quarter loss

DALLAS — AMR Corp., the parent of American Airlines, lost over half a billion dollars in the first quarter — more even than it lost during the depths of the recession last year — as fuel costs rose and passengers were slow to come back.

Analysts said management appeared to be reacting too slowly to the debacle. AMR shares slid more than 9 percent in afternoon trading.

Air travel is recovering from the recession, but only slowly. Traffic on American, measured by the number of miles that paying passengers flew, increased less than 1 percent in the quarter. The company is hoping for stronger bookings in the busy summer vacation season, and analysts expect AMR will make money in the second and third quarters.

Carriers are raising fares and picking up revenue from extra fees for checked bags and other services, but they’re also facing resurgent fuel prices.

American also faces difficult relations with its labor unions, which are negotiating for pay raises while the company tries to hold the line on spending. Two of American’s three unions have asked federal mediators to let them start a 30-day countdown toward a strike; mediators instead ordered negotiators to keep working.

AMR lost $505 million in the first quarter, or $1.52 per share. February snowstorms on the East Coast and earthquakes in Haiti and Chile cost the company between $20 million and $25 million.

AMR said that without a one-time expense for devaluation of Venezuelan currency in January, it would have lost $452 million, or $1.36 per share.

Revenue rose 4.7 percent, to $5.07 billion.

Analysts, who usually exclude one-time costs from their forecasts, were expecting AMR to lose $1.31 per share on $5.1 billion in sales.

In last year’s first quarter, the Fort Worth, Texas-based company lost $375 million, or $1.35 per share.

CEO Gerard Arpey said AMR made progress boosting revenue but couldn’t overcome the global economic slowdown and resurgent fuel prices.

AMR, which also owns the American Eagle regional airline, increased spending on fuel and maintenance by double-digit percentages. Fuel prices have risen about 20 percent since early February, and regulators have proposed fining AMR millions for alleged violations of federal maintenance rules.

American is pinning hopes for a turnaround largely on boosting revenue from partnerships with Japan Airlines, British Airways and other foreign carriers.

On a conference call, analysts questioned whether the company was being too timid in the face of a half-billion-dollar loss.

“Is this really all you’ve got?” asked JPMorgan analyst Jamie Baker, after hearing AMR executives lay out their plans. Kevin Crissey of UBS said AMR’s strategy didn’t seem very bold. Other analysts said American should cut capacity to drive up prices.

While the nation’s other largest airlines are expected to post full-year profits for 2010, AMR is expected to keep losing money. It has high labor costs and hasn’t been able to boost passenger traffic, which rose only 0.4 percent over the recession-burdened first quarter of 2009.

AMR executives said things should look better this summer.

“We’ve got to expect that with the recovering economy we’ll be able to drive revenues beyond our cost structure,” Arpey said. “If we don’t do that, then you’re going to have to start thinking about further capacity reductions.”

American scored a significant win in the quarter by preserving an alliance with Japan Airlines, which was wooed by Delta Air Lines Inc. And U.S. regulators signaled willingness to let American work closely with British Airways on trans-Atlantic flights without violating antitrust laws.

At home, American is adding flights in New York to compete with Delta and other carriers in the largest U.S. travel market.

AMR shares tumbled 81 cents, or 9.5 percent, to $7.76 in afternoon trading.