Flight Delays, Cancellations May Cost AMR A 4th Qtr Loss

Analysts who had previously forecast 4th quarter earnings for American Airlines parent AMR are now saying the airline will likely end the year with a loss.

According to the Associated Press, AMR reported rising costs after market closing on Friday blaming higher maintenance expenses and weather-related cancellations in November and December.

Industry observers had previously expected America's largest airline to earn some $.50 per share in the year's final quarter. Updated estimates now show a $.40 per share loss. This despite an AMR estimate on Friday of a boost in revenue per passenger mile flown of 3.6 percent to 4.6 percent over the same period last year.

There is some speculation among analysts that last week's blizzard in Denver might have the same effect on United which maintains a major hub operation at Denver International. The blizzard closed the airport for two days resulting in massive flight cancellations.

American Airlines is still expected to show a profit for the year, but Friday's news had a chilling affect on most estimates. Analysts' now say AMR's annual earnings will range from $.96 to $1.18 per share -- down from $1.25 to $1.50 per share.

Most airlines have battled rising costs over the past two year by raising fares. Reportedly, the majors are pushing for another $5 increase for most US flights, with American asking for a $20 increase to cover higher fuel costs.

All of this comes as an Icelandic investment house, FL Group, purchased a six percent stake in AMR making it the corporation's third largest single investor.

Amid all the merger offers floating around the industry, FL Group believes American Airlines will prosper as market consolidation cuts excess capacity.

FL Group paid $400 million for $12.8 million shares of AMR. It also owns Danish low-cost carrier Sterling Airlines and a portion of Finland's Finnair. This is the group's first investment in US airlines.

FMI: www.aa.com, www.united.com, www.flgroup.is