AMR Corp. (AMR), parent company of leading air carrier American Airlines, is flying through the rough-and-tumble business conditions that typify the often-volatile airline industry. The Fort Worth, Texas company reported a first-quarter net loss of $436 million, or $1.31 per share, due largely to a $336 million surge in its fuel bill compared to the first quarter of 2010.
Nevertheless, the first-quarter loss was an improvement over AMR's net loss of $505 million, or $1.52 per share, in last year's first quarter.
AMR's operating revenue in the first quarter increased to $5.53 billion, up 9.2 percent from the same period last year, but part of the top-line gain was negated by the cost of aircraft fuel, which jumped 24.8 percent in the January to March period, to $1.84 billion.
AMR increased its cash and cash equivalents to $5.79 billion at the end of March from $4.49 billion at the end of 2010, but the company had to issue $1.16 billion of debt to do so.
American Airlines may get closer to consistent profitability and positive cash flow by getting a bit smaller. In March, American announced that it would reduce its system-wide passenger capacity in the fourth quarter of 2011 and in April the carrier said it added an incremental 1 percent to its planned capacity cutback.
The prospect of higher jet fuel prices has dimmed the outlook for American and the rest of the industry. The International Air Transport Association (IATA), a trade group representing airlines, cut its forecast of worldwide airline industry profits this year to $8.6 billion from $9.1 billion, citing a surge in fuel prices.
IATA reported in March that "jet kerosene prices have doubled since their low point in early 2009, reaching $113 a barrel in early 2011."
Credit rating agencies such as Standard & Poor's are wary of the possibility that rising fuel prices, tough competition, and other negative forces could push AMR's cash position into an extended descent. In May, S&P downgraded its outlook for AMR's credit quality to negative from stable and lowered rating on certain debt securities issued by the airline.
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