Wed, Dec 27, 2006
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.
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