American Airlines parent AMR lost $344 million in fourth quarter

AMR lost $344 million in fourth quarter

DALLAS — American Airlines lost more than $340 million in the final quarter of 2009 and now must fight to prevent the loss in 2010 of a valuable partner in Asia.

American CEO Gerard Arpey said Wednesday he would use any means possible to block rival Delta from forming an alliance with American’s longtime partner, Japan Airlines, which filed for bankruptcy this week.

The battle for JAL plays out against the background of a limping domestic market. Major U.S. airlines have been clobbered by the recession, which led to a slump in traffic and caused many business travelers to stay home or buy cheaper tickets. Airlines haven’t been able to raise fares fast enough to make up the difference, although fees on checked bags helped.

Now they’re also watching with alarm as fuel prices surge — roughly doubling since last March. American says it expects to pay 20 percent more per gallon for jet fuel this year than in 2009.

American’s parent, AMR Corp., said Wednesday it lost $344 million in the fourth quarter and nearly $1.5 billion for all of 2009. Quarterly revenue fell 7.4 percent.

AMR was the first major U.S. carrier to report fourth-quarter earnings, and analysts expected it to post the largest loss, followed by United parent UAL Corp. and Delta Air Lines Inc.

AMR said that without special items such as a tax gain, it would have lost $415 million, or $1.25 per share, in the fourth quarter. Analysts, who usually exclude items from their calculations, expected a loss of $1.23 per share.

Revenue fell to $5.06 billion, slightly above the $5.03 billion forecast of analysts, according to Thomson Reuters.

Matthew Jacob, an analyst at Majestic Research, noted that traffic and revenue trends in the airline industry improved toward the end of last year. He also credited American for boosting “other revenues” by 7 percent by charging for food and checked bags. But he said those fees won’t overcome weakness in business travel.

“The airlines need to see a cyclical recovery driven by better economic conditions so businesses and corporations will travel more,” he said.

AMR officials said they are starting to see improvement in bookings by business travelers, although revenue paid by those customers is flat due to lower prices.

The Air Transport Association, a trade group of the largest U.S. airlines, said Wednesday that passenger counts fell 6 percent last year but passenger revenue slumped 18 percent because of price cuts.

Arpey said — as he has before — that airlines need to raise fares. He also said American has turned aggressive at reducing the number of seats sold at the lowest prices.

American expects to raise passenger-carrying capacity about 1 percent in 2010, with all the increase on international routes. Much of the increase is simply restoring flights that were dropped because of swine flu fears.

For all of 2009, AMR lost $1.47 billion, or $4.99 per share, compared with a loss of $2.12 billion, or $8.16 per share, in 2008. Revenue tumbled 16.2 percent to $19.92 billion, as $3.85 billion in revenue vanished with slow demand for travel.

With the books closed on 2009, AMR officials are focused on the fight over Japan Airlines.

JAL filed for bankruptcy protection on Tuesday, and reports in the Japanese press say the airline wants to strike a partnership with Delta, the world’s largest airline. AMR chief financial officer Thomas Horton said losing JAL would cost his company at least $100 million per year in revenue, while some analysts have put the figure much higher.

Arpey said his company would “object vigorously through whatever means that we might have” to an alliance between Delta and JAL.

Arpey said a Delta-JAL partnership would control about two-thirds of the U.S.-Japan market and would be so dominant that it would face antitrust hurdles. He said a Delta-JAL alliance “makes a farce and mockery” of efforts to increase airline competition between the two countries.

Delta spokesman Trebor Banstetter responded, “We are confident a Delta-JAL partnership would receive antitrust immunity, based on long-standing (U.S. Transportation Department) policy and precedent.” The department last year approved Continental’s request for immunity to work with United and Germany’s Lufthansa on international routes.

American has offered to make a larger investment in JAL than Delta proposed. But AMR officials now admit that Japanese officials seem less interested in the investment offers.

American is also waiting to learn whether U.S. regulators will approve antitrust immunity for an international joint venture with British Airways and other carriers.

Shares of Fort Worth-based AMR, which also owns the American Eagle commuter airline, rose 41 cents, or 5.1 percent, to $8.49.