American, United Airlines Post Billion-Dollar Losses

American Airlines may cut up to 400 flight attendant positions.

AMR Corp., parent company of Fort Worth-based American Airlines, announced Wednesday that the company lost $340 million in the fourth quarter and a whopping $2.1 billion in 2008 -- in large part because of incredibly high fuel costs.

American Airlines spokesman Tim Smith said Wednesday fuel costs hit the company hard.

"We're not putting 20 gallons in the tank, and we pull up to the pump 60,000 times a month, so the costs add up quickly," he said.

Smith said the average cost of a gallon of fuel in 2008 cost the company $3.03, up from $2.13 in 2007. The jump in fuel prices cost the American $2.7 billion more than last year.

AMR said it spent more than $9 billion on fuel in 2008, more than three and a third times what the airline spent in 2003 and more than one and 1/2 times what it spent in 2005.

The sluggish economy also kept consumers from buying tickets, Smith said. But the company has made improvements, he said.

"Our on-time performance, our number of passenger complaints have dramatically improved in two or three months of 2008," Smith said.

The good news for consumers is that airlines are slashing some fares to put passengers on their planes, a trend likely to continue at least into late spring.

"It's a buyer's market, just like in real estate or retail," said Tom Parsons, chief executive of travel Web site

AMR Chairman and Chief Executive Gerard Arpey said his airline faces a wobbly economy, weaker demand for travel and potentially volatile fuel prices.

Still, Arpey said he was "guardedly optimistic we can regain momentum in 2009." AMR lost $2.07 billion in 2008, as high fuel prices and a recession ended a run of two straight profitable years.

In a news release, AMR said that the results for the fourth quarter of 2008 include the impact of two special charges: a $23 million charge for aircraft groundings, facility write-offs and severance related to the company’s previously announced capacity reductions during the last four months of 2008, and a non-cash pension settlement charge of $103 million driven by a large number of early pilot retirements during 2008, which required any unrecognized gains or losses of the related defined benefit pension plan to be recognized on a proportional basis.

Excluding those special charges, AMR lost $214 million, or .77 per share, in the fourth quarter of 2008. Read the entire news release from AMR here.

AMR isn't the only one feeling the crunch. On Wednesday, United Airlines posted a 4Q loss of $1.3 billion and suggested the company may cut 1,000 jobs.

AMR's poor financial performance is fueling speculation that the airline may cancel flights and ultimately cut more jobs.

"They had a one-two punch in 2008," said Fort Worth Star-Telegram aviation writer Trebor Banstetter.

In the first half of the year, fuel prices were still sky high. In the second half, passenger demand dropped.

"If their bookings are way down, American may decide it needs to cut more flights," Banstetter said. "And that generally means they don't need as many employees."

In a message posted on its Web site, the Association of Professional Flight Attendants said the airline could cut up to 400 flight attendants. Management has notified union leaders that the company may need to reduce staffing by 200 to 400 flight attendants. The positions could be eliminated through voluntary reductions.

The flight attendants union said it agreed to concessions in 2003 and just started negotiating with American on a new contract.

"The fourth quarter loss was expected," Diana Dunn, APFA's negotiator, said. "It's a big loss, but it's better than some of the other carriers. We must be doing something right."

Even before the fourth quarter results were announced mid-morning Wednesday, AMR had lost $567 million in 2008.

Shares of AMR plunged $2.48, or 23.7 percent, to $7.98 Wednesday, as airline officials said advance bookings were weak, especially for March. See the latest stock price on by clicking here.

According to the news releases, in 2007 AMR reported a net profit of $504 million, or $1.78 per diluted share. In addition to the special items in the fourth quarter of 2007 totaling a net positive impact of $115 million, the 2007 results included a $30 million charge related to prior-period salary and benefit expense accruals. Excluding those special items, AMR earned a profit of $420 million, or $1.50 per diluted share, in 2007.

American announced that it would take fewer deliveries of new planes through 2010 due to delays caused by a strike at Boeing Co. American will get 68 Boeing 737s to replace some of its older, gas-guzzling MD-80s, instead of 76 in the next two years. And because of the weak economy, the company said, it won't make up the difference by delaying the retirement of MD-80s.

That will cut American's capacity by more than 6.5 percent in 2009 -- about 1 percentage point more than previously forecast.

Analysts are betting on a recovery to begin by early summer. They expect AMR to lose 21 cents per share in the first quarter but earn $2.27 per share for the entire year -- even with a projected 6.6 percent revenue decline.

Copyright AP - Associated Press
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