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Transportation

AMR Sets Low Bar For Airline Sector Earnings (AMR, CAL, LUV)

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By Douglas A. McIntyre Updated Published
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AMR Corp. (NYSE: AMR) has some pretty disappointing figures, at least until you compare them to analyst expectations.  AMR posted earnings of -$1.39 on a net basis and -$1.14 EPS on a non-GAAP basis as its second quarter traffic fell by 16%.  Revenues was $4.98 billion.  Thomson Reuters listed the non-GAAP consensus as -$1.28 EPS on $4.9 billion in revenue.  This report has likely set the bar very low for Continental Airlines, Inc. (NYSE: CAL) and Southwest Airlines Co. (NYSE: LUV) ahead of their earnings.

The problems for AMR are in demand and in capacity.  It sees mainline capacity down 7.5% in the second half of the year, with the full year domestic capacity down 9% and international down over 4%.

The good news is that costs are down.  Full mainline unit costs are expected to be down  over 9% this year and it sees $2.05/gallon as the norm for gasoline in Q3 and has $1.98 as the 2009 average after paying $1.90 for jet fuel in Q2.  If you back out  the Q2 fuel costs, total costs were up 5% for the mainline unit.  It sees total Q3 mainline unit costs down by 14%, but that is expected to be up by 7.2% on an ex-fuel basis.

AMR’s cash and short-term investments were roughly $3.3 billion at the end of the quarter, while total debt was listed as roughly $14.2 billion.

What AMR has done is just set the bar artificially low for the other airline carriers reporting earnings next week.  AMR shares are up 5% at $4.40 in early trading.  Continental Airlines, Inc. (NYSE: CAL) is up 3.6% at $10.15 and Southwest Airlines Co. (NYSE: LUV) is up 2.5% at $6.99.

Jon C. Ogg

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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