American Airlines parent company AMR has announced losses again.  This time, despite an arguably very strong industry third quarter, AMR has losses of about $162 million.  $50 million of that resulting from hedging and foreign currency devaluations. 

There is no surprise here. 

Even when CEO Gerard Arpey responds that the carrier is “. . . taking aggressive actions to improve the company’s performance and strengthen its foundation for long-term success.”  He also says:

“We have put in place many of the critical building blocks for a successful future, including a strong network and alliance partnerships, accelerated fleet renewal plans and innovative products and services to enhance our customers’ experience.”

The problem is the stark contrast between AMR and other major legacy airlines’ performance.  In addition, it’s clear that AA’s competitors are not permitting their costs, especially labor costs, to rise and lessen the differences between them and AA.

The other problem is the perception that AA may have waited to long to get aggressive on responding to its problems.  They have allowed labor contracts to fester.  When other airlines dumped fuel hogs, AA waited 2 more years before getting aggressive on fleet renewal.  Other airlines continue to be more aggressive on capacity management.  American hasn’t engaged in developing its international flying aggressively in stark contrast to airlines such as Delta and United. 

I think analysts see a a “perfect storm” of consequences gathering on the horizon.  The only thing that keeps them from howling about it too much is the rather large cash holdings AA still has.  Unfortunately, those just eroded another $163 million which isn’t a trivial sum of money.

Filed under: Airline News by ajax