AMR lost money in 3Q on plunge in revenue

DALLAS – American Airlines knows that not enough of you are flying.

American's parent, AMR Corp., said Wednesday that it lost $359 million in the third quarter.

The airline wooed customers recently with its "We know why you fly" advertising campaign. And it brought in extra money by raising fees on checked baggage. But in a recession, that wasn't enough.

Traffic fell sharply, especially among business travelers. As a result, AMR said Wednesday, revenue tumbled 20.2 percent from the same quarter in 2008, and the nation's second-largest airline lost money.

The good news for AMR is that analysts no longer think it could go broke this winter. The airline raised more than $4 billion in cash during the third quarter and headed into the traditionally slow fourth quarter with a comfortable cash cushion.

AMR's loss compared with a gain of $31 million in the third quarter of 2008, a profit made possible by sale of the company's investment business.

Excluding charges to write down aircraft that were sold or grounded, the company would have lost $265 million, or 93 cents per share, on revenue of $5.13 billion this summer.

Analysts expected AMR to lose 95 cents per share, without those write-downs, on $5.09 billion in revenue.

The results would have been far worse but for cheaper jet fuel. AMR spent 47 percent less on fuel than it did during the summer of 2008, but that benefit was swamped by "a difficult revenue environment," as CEO Gerard Arpey described the recession.

American is more dependent than most airlines on business travelers who typically pay higher fares, often sitting in the pricey front cabins. The recession has caused companies to cut back on travel.

American filled many of its planes instead with leisure travelers, the drawback being that vacationers usually pay lower fares and don't mind sitting in coach.

The tilt toward leisure travelers helped pushed American's ratio of revenue to capacity — a key measure of financial performance in the airline industry — down by 14.5 percent, slightly more than it was able to cut costs.

Fort Worth-based American hopes to boost revenue with an international joint venture with British Airways and Spain's Iberia. The Transportation Department is expected to rule soon on American's request for antitrust immunity to let those carriers set prices and schedules together.

The pilots' union at American opposes the company's plan, fearing it could lead to job losses.

AMR shares fell 33 cents, or 4.3 percent, to $7.33 in late-morning trading.