American Airlines parent AMR’s shares fall after analysts pan company’s 3Q outlook

By David Koenig, AP
Wednesday, September 22, 2010

AMR shares fall after disappointing outlook

DALLAS — Shares of American Airlines parent AMR Corp. tumbled more than 9 percent Wednesday afternoon after the company’s outlook for stronger revenue failed to impress some analysts.

The company said late Tuesday that third-quarter unit revenue, or total revenue divided by available seats times miles flown, would grow between 9.8 percent and 10.8 percent compared with a year ago.

At a time when many airlines have been boosting revenue with higher fares and fees on checked baggage, analysts’ comments suggested that AMR’s outlook wasn’t rosy enough. Three of them widened their estimates of AMR’s full-year losses.

JP Morgan analyst Jamie Baker said the outlook “paints a softer-than-expected 3Q outcome,” and Dahlman Rose & Co. analyst Helane Becker said she would continue to avoid AMR shares.

AMR was the only major U.S. airline to lose money in the second quarter. Analysts expected it to earn 53 cents per share in the third quarter, according to a Thomson Reuters survey.

Becker widened her full-year estimated AMR loss to $1.65 per share from $1.53 per share. Similarly, Baker predicted a loss of $1.22 per share, wider than his previous forecast of a loss of 82 cents per share; and Stifel Nicolaus analyst Hunter Keay called for a loss of $1.22 per share compared with his old estimate of a $1.08-per-share loss.

Keay said AMR’s revenue guidance indicated that domestic leisure fares are probably softening.

AMR fell 60 cents, or 8.7 percent, to $6.28.

In its report Tuesday, AMR also said its balance of unrestricted cash and short-term investments would fall to around $4.3 billion by Sept. 30, down from about $5 billion at the end of June.

Becker said labor issues were a bigger problem than liquidity.

“We continue to avoid these shares due to the lack of profitability and the company’s labor contracts,” she wrote in a note to clients.

American says it has higher labor costs than other airlines, and it’s negotiating new contracts with its three unions. Two of the unions have asked federal officials for permission to move toward a strike.

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