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AMR Corp. shows quarterly profit on 9.9% revenue growth - UPDATE 5
AFX
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SAN FRANCISCO (AFX) - American Airlines parent AMR Corp. on Wednesday reported its first quarterly profit without the benefit of any special gains in four and a half years, overcoming higher prices paid for fuel.
Shares of AMR rose 1.7% to $14.47 as the most active stock in the airline group. The session's volume topped 8.9 million shares.
Continental Airlines also reported a profit on Wednesday as both carriers benefited from rising revenue but record jet fuel prices took a toll.
'Both Continental and American were 50% higher on the fuel line and it's pretty much swamping the unit revenue gains, which are meaningful,' said Bill Warlick, Fitch Ratings credit analyst.
AMR's second-quarter net income rose to $58 million, or 30 cents a share, compared with year-ago net income of $6 million, or 3 cents.
The average analyst estimate as compiled by Thomson First Call was for earnings of 15 cents a share.
Revenue rose 9.9% to $5.31 billion from last year's $4.83 billion, exceeding analyst's average view of $5.14 billion.
AMR's quarterly operating income reached $229 million, up 16.8% from the prior year's $196 million.
American's load factor increased to 79.5% from 75.7%, amid a 7.4% rise in traffic and 2.3% growth in capacity.
'The high price of fuel remains one of the biggest clouds hanging over our company and our industry,' said Chairman and Chief Executive Officer Gerard Arpey.
AMR paid $434.2 million more in fuel costs in the quarter, consuming 822.3 million gallons at an average price of $1.642 per gallon as opposed to $1.114 a year earlier. The total outlay reached $1.35 billion.
Meanwhile, labor costs slipped 1.9% to $1.67 billion in the quarter.
And during a conference call, Chief Financial Officer James Beer said AMR expects third-quarter fuel expenses to reach $1.5 billion based on an average jet-fuel price of $1.85 a gallon. Beer explained that the company is cautiously hedging against higher prices.
For the year, fuel is expected to run an average price of $1.72 a gallon, Beer said.
The airline, like rivals, has been fighting to hold down its fuel costs.
At the same time, the carrier is trying to charge as much as possible on its tickets without deterring customers.
Against that backdrop, overall mainline capacity is expected to be 2.4% higher this year than 2004, executives said.
The April-through-June results stand as AMR's first profitable quarter without special items since the fourth quarter of 2000.
J.P. Morgan had downgraded the stock to neutral ahead of the report, noting the likelihood that the company's results would be better than expected.
'With shares up 79% from their January lows (vs. S&P 500 +5%) and despite strong liquidity, we envision superior risk/reward elsewhere,' wrote J.P. Morgan analyst Jamie Baker.
This story was supplied by MarketWatch. For further information see www.marketwatch.com.
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