American Airlines parent AMR posts narrow 2Q loss while US Airways joins profit-making crowd

AMR posts loss, US Airways reports big 2Q gain

US Airways joined Delta and United in posting a big second-quarter profit. American Airlines missed the party.

Alone so far among the nation’s biggest airlines, American reported Wednesday that it lost money this spring, although far less than it did a year ago. American blames its troubles on high fuel and labor costs and a competitive handicap on international flights.

Overall the second quarter is shaping up as the airline industry’s best in three years.

Executives say business travel is coming back after the recession. Another big part of the airlines’ newfound success is their willingness to reduce flights, leading to fewer seats and higher fares. So far, they have resisted the urge to expand quickly at the first hint of improving demand, which in the past led to ruinous boom-and-bust cycles.

The average fare on American, for example, rose 14 percent compared with a year ago.

American parent AMR Corp. lost $10.7 million in the second quarter, a huge improvement over the loss of $390 million in the same period last year. Still, the loss stuck out compared with the combined $1 billion in profits reported by US Airways, Delta Air Lines Inc. and United parent UAL Corp.

Discount airline AirTran reported a smaller profit, and Continental is expected to say Thursday that it also made money last quarter.

American, the nation’s second-biggest airline behind Delta, blamed its loss on a 24 percent spike in fuel costs. But all airlines are facing higher fuel costs.

Michael Derchin, an analyst with CRT Capital Group, said American suffers from higher labor costs because unlike Delta, United and US Airways, it didn’t cut wages and pensions through the bankruptcy process.

AMR spends 30 percent of its revenue on wages and other labor costs. Delta’s labor costs were 21 percent or revenue in the second quarter, United’s 20 percent and US Airways’ 18 percent.

AMR CEO Gerard Arpey said American spends $600 million a year more on higher wages and contract rules that limit productivity. He said as other airlines negotiate new, post-bankruptcy labor contracts, their costs too will rise. They will have to raise fares, which will mean more revenue for American as well, he said.

American’s unions blame company management for AMR’s problems, saying executives lack vision, destroyed employee morale by taking stock bonuses, and made poor decisions such as keeping old, inefficient planes in the fleet. The unions are locked in bitter negotiations for new contracts and are demanding pay raises to offset wage cuts made back in 2003.

Derchin said American also has lacked the antitrust immunity for joint ventures with foreign airlines that Delta and United enjoy. On Tuesday, U.S. regulators approved American’s bid to work closely with British Airways — even setting fares and schedules together, which would be illegal without antitrust immunity. Derchin expects American to get more revenue from international routes as a result.

American is taking other steps to fix its business. It struck a deal with JetBlue Airways to funnel more Europe-bound passengers to American flights leaving from New York and Boston. Also, it’s focusing flights at a handful of big hub airports, working on a joint venture with Japan Airlines and considering a sale of its American Eagle regional airline.

American also said Wednesday it ordered 35 more Boeing 737-800 jets as it upgrades its fleet and phases out fuel-guzzling older McDonnell Douglas planes.

AMR’s loss in the April-through-June quarter amounted to 3 cents per share. Revenue rose 16 percent from a year ago, to $5.67 billion. Analysts expected a loss of a penny per share on $5.69 billion in revenue.

US Airways, the nation’s sixth-largest airline, said a bump in business travelers who paid higher fares helped it earn $279 million, or $1.41 per share — $1.34 per share without special gains. That beat the $1.18 per share forecast by analysts. Revenue rose more than 19 percent to $3.17 billion.

Chairman and CEO Doug Parker said the airline has cut capacity, reined in costs, added fees for things such as checked baggage, and made the operation more reliable.

Parker also assured shareholders he won’t issue more stock, which the airline did in September, diluting the value of existing shares. He said the company sold stock last year just to survive, but is in much better shape now.

AirTran Holdings Inc., the owner of AirTran Airways, said Wednesday it earned $12.4 million, down 84 percent from a year ago, as higher costs and bad bets on the price of fuel offset a 16 percent increase in revenue.

US Airways shares gained 29 cents, or 3.3 percent, to close at $9.21. Other airlines fell with the overall market. AMR shares slipped 26 cents, or 3.8 percent, to close at $6.59. UAL shares dropped almost 2 percent, AirTran shares lost 3.1 percent and Delta shares fell 5.5 percent.

Koenig reported from Dallas. AP Airlines Writer Joshua Freed in Minneapolis contributed to this report.