UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of earliest event
reported: October 20, 2004
AMR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8400 75-1825172
(State of Incorporation) ( Commission File Number) (IRS Employer
Identification No.)
4333 Amon Carter Blvd. Fort Worth, Texas 76155
(Address of principal executive offices) (Zip Code)
(817) 963-1234
(Registrant's telephone number)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
AMR Corporation (the Company) is furnishing herewith a press
release issued on October 20, 2004 by the Company as Exhibit 99.1
which is included herein. This press release was issued to
report the Company's third quarter 2004 results.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
AMR CORPORATION
/s/ Charles D. MarLett
Charles D. MarLett
Corporate Secretary
Dated: October 20, 2004
EXHIBIT INDEX
Exhibit Description
99.1 Press Release
Exhibit 99.1
CONTACT: Al Becker
Corporate Communications
Fort Worth, Texas
817-967-1577
corp.comm@aa.com
FOR RELEASE: Wednesday, Oct. 20, 2004
Editor's Note: A live Webcast reporting third quarter results
will be broadcast on the Internet on Oct. 20 at 2 p.m. EDT.
(Windows Media Player required for viewing.)
AMR CORPORATION REPORTS A THIRD QUARTER LOSS OF $214 MILLION
AND ENDS QUARTER WITH $3.6 BILLION IN CASH AND SHORT-TERM
INVESTMENTS, INCLUDING A RESTRICTED BALANCE OF $481 MILLION
Results Impacted by High Fuel Prices, Low Fares and Multiple
Hurricanes
American Announces Series of Steps to Increase Revenues and
Reduce Costs
Actions Include American Withdrawing Equivalent Of 15 Aircraft in 2005
And American Eagle Not Taking Delivery of 18 Embraer Regional Jets
FORT WORTH, Texas -- AMR Corporation, the parent company of
American Airlines, Inc., today reported a net loss of $214
million in the third quarter, or $1.33 per share. This compares
to last year's third quarter net profit of $1 million.
"Our business was buffeted by three dramatic and harmful
developments during the third quarter," said AMR Chairman and CEO
Gerard Arpey. "The first was record high fuel prices. The
second was a weak revenue environment which meant that despite
our best efforts -- and unlike other fuel-intensive businesses --
we have been largely unable to pass the higher fuel costs on to
our customers. The third development was the unprecedented
series of hurricanes, which depressed revenue, increased costs
and repeatedly disrupted an important part of our network."
Skyrocketing fuel prices during the quarter resulted in a
year-over-year increase of more than 40 cents per gallon, which
translated into $342 million in incremental fuel
-- more --
costs compared to a year ago. Meanwhile, American's revenue per
available seat mile declined 2.5 percent, driven by a 4.8 percent
drop in passenger yield (passenger revenue per passenger mile).
"Weak yields are an industry-wide phenomenon," Arpey said.
"Although many industries are getting hammered by high fuel
prices, the airline industry has largely been unable to price its
product in a way that reflects the higher cost of production.
Low cost carrier growth is partly responsible for the depressed
fare environment, but there are other factors at work too.
"Specifically, there is a growing disconnect between
industry capacity growth in the domestic marketplace and overall
economic growth," Arpey said. "While the economy has grown
roughly three and a half percent this year, available domestic
seat miles are up more than six percent. Making matters worse
has been the competitive behavior of some carriers either in or
on the verge of bankruptcy."
According to Arpey, the confluence of high fuel prices and
low fares has sharpened the company's focus on making the changes
necessary to improve the company's financial condition. "The
harsh reality is that despite our tremendous progress to date,
our cost structure remains too high for us to succeed in a world
where the price of oil is at such an extraordinary level," Arpey
said. "However, there is still a lot we can do, and are doing,
to increase revenues and reduce expenses."
That said, AMR anticipates the record high fuel prices to
continue in the fourth quarter -- a quarter that is typically
seasonally weak from a revenue perspective. Thus, AMR expects to
incur a fourth quarter loss significantly larger than that
recorded in the third quarter.
Arpey cited a series of steps American has taken to increase
revenues, cut costs and put the airline on a stronger financial
footing. One expected outcome of these initiatives is that there
will be a reduction in the size of the workforce, although the
details for accomplishing this are still being identified.
American's new initiatives include:
o Aircraft Decisions -- American has decided to withdraw
capacity equivalent to 15 narrow-body aircraft in 2005 while its
regional affiliate, American Eagle, has reached an agreement in
principle with Embraer to not take delivery of the last 18 ERJ-
145 regional jet aircraft, scheduled for delivery between July
2005 and February 2006.
-- more --
o Seat Decisions -- American will add back a portion of the
coach seats previously removed from its MD80, 737, 767 and 777
fleets. On the MD80 and 737 aircraft, only one of the two rows
of coach seats originally removed will be added back to those
airplanes. In addition, the MD80 reconfiguration will expand the
first class cabin by two seats, in recognition of the value
American's customers place on its first class product.
o International Expansion -- American intends to increase
revenue by continuing its expansion in the growing Asia/Pacific
market. Yesterday, the airline announced that it will launch
daily nonstop service between Chicago and Nagoya, Japan, on April
3, and resume daily nonstop service between Dallas/Fort Worth and
Osaka, Japan, on Nov. 1, 2005. American is also vigorously
seeking authority to begin nonstop service between Chicago and
Shanghai, China, starting on May 1, 2005.
o Simplified Operations -- American has decided to expand
upon an experiment it launched in the summer of 2004 in Chicago,
in which aircraft types were isolated to certain stations, and
flight crew and aircraft were scheduled together. This change of
approach will be implemented throughout American's system in
2005, Arpey said. "We are pressing ahead aggressively to
streamline and simplify American's operations."
o Other Revenue Initiatives -- American's revenue
initiatives have involved a variety of fare actions in certain
markets as well as the introduction of ticketing fees. American
now charges $5 for tickets purchased through U.S. reservations
offices while a $10 fee applies to tickets bought at U.S. airport
locations. There also is now a fee for paper tickets purchased
through travel agents in certain European countries, the
Caribbean, Mexico and Latin America for itineraries that are
eligible for electronic tickets. Additionally, the U.S.
Department of Transportation recently issued a favorable ruling,
allowing U.S. carriers to apply fuel surcharges to all of their
international routes, which should further improve revenue.
o Dallas Reservations Office Consolidation -- To cut costs
and increase efficiency, American said it has decided to
consolidate its reservations office in south Dallas with its much
larger Southern Reservations Office near DFW Airport, saving the
company hundreds of thousands of dollars a year in various
expenses.
-- more --
With regard to adding back seats, Arpey said American is
acting to increase revenue by eliminating a seating capacity
disadvantage largely attributable to the More Room Throughout
Coach program the airline launched several years ago. "When we
launched More Room Throughout Coach, healthy yields and robust
business travel were the norm, and both conditions were essential
to the success of More Room," Arpey said. "However, times have
changed, and we must acknowledge that in today's low-fare
environment, having fewer seats on our aircraft has put us at a
real revenue disadvantage compared to other airlines."
Arpey said that as a result of its aircraft and seating
changes, American's first quarter domestic capacity will decrease
approximately 5 percent. "Given our skyrocketing fuel costs, and
our limited ability to pass those costs on to our customers, we
feel it is prudent to draw down a portion of our domestic
schedule. And rather than decrease flight schedules across the
board, we will be focusing our cuts on specific markets where our
service is either redundant to service to nearby cities or is
less essential to our domestic network. At the same time, we are
going to intensify our focus on our areas of strength. For
instance, we now plan to increase our flying at Dallas/Fort Worth
by 90 operations year over year, a larger increase than we had
previously announced," Arpey said.
As a result of the initiatives discussed above, the company
reported that some special charges may be recognized in the
fourth quarter -- the amount and scope of which are currently
being identified. In addition, the company expects to record a
gain of approximately $145 million from the sale of its interest
in Orbitz (an on-line travel agency in which American holds an
ownership stake), if the closing of that sale occurs in the
fourth quarter.
"Very challenging industry conditions are nothing new to the
people of American Airlines," Arpey said. "We remain committed
to continuing to evolve our company by wringing out costs and
inefficiency from everything we do. What's more, we are
determined to make the hard choices necessary to ensure our
company's competitiveness and ultimate success."
-- more --
Editor's Note: AMR's Chairman, President and Chief Executive
Officer, Gerard Arpey, and its Chief Financial Officer, James
Beer, will make a presentation to analysts during a
teleconference on Wednesday, Oct. 20, from 2 p.m. to 2:45 p.m.
EDT. Following the analyst call, they will hold a question-and-
answer conference call for media from 3 p.m. to 3:45 p.m. EDT.
Reporters interested in listening to the presentation or
participating in the media Q&A should call 817-967-1577 for
details.
Statements in this news release contain various forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which represent the Company's
expectations or beliefs concerning future events. When used in
this news release, the words "expects," "plans," "anticipates,"
"indicates," "believes," "forecast," "guidance," "outlook" and
similar expressions are intended to identify forward-looking
statements. Forward-looking statements include, without
limitation, the Company's expectations concerning operations and
financial conditions, including changes in capacity, revenues,
and costs, future financing plans and needs, overall economic
conditions, plans and objectives for future operations, and the
impact on the Company of its results of operations in recent
years and the sufficiency of its financial resources to absorb
that impact. Other forward-looking statements include statements
which do not relate solely to historical facts, such as, without
limitation, statements which discuss the possible future effects
of current known trends or uncertainties, or which indicate that
the future effects of known trends or uncertainties cannot be
predicted, guaranteed or assured. All forward-looking statements
in this release are based upon information available to the
Company on the date of this release. The Company undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events,
or otherwise.
Forward-looking statements are subject to a number of risk
factors that could cause actual results to differ materially from
our expectations. The following factors, in addition to other
possible factors not listed, could cause the Company's actual
results to differ materially from those expressed in forward-
looking statements: changes in economic, business and financial
conditions; the Company's substantial indebtedness; continued
high fuel prices and the availability of fuel; further increases
in the price of fuel; the residual effects of the war in Iraq;
conflicts in the Middle East or elsewhere; the highly competitive
business environment faced by the Company, with increasing
competition from low cost carriers and bankrupt carriers and
historically low fare levels (which could result in a further
deterioration of the revenue environment); the ability of the
Company to implement its restructuring program and the effect of
the program on operational performance and service levels;
uncertainties with respect to the Company's international
operations; changes in the Company's business strategy; actions
by U.S. or foreign government agencies; the possible occurrence
of additional terrorist attacks; another outbreak of a disease
(such as SARS) that affects travel behavior; uncertainties with
respect to the Company's relationships with unionized and other
employee work groups; the ability of the Company to satisfy
existing financial or other covenants in certain of its credit
agreements; the availability of future financing; the ability of
the Company to reach acceptable agreements with third parties;
and increased insurance costs and potential reductions of
available insurance coverage. Additional information concerning
these and other factors is contained in the Company's Securities
and Exchange Commission filings, including but not limited to the
Form 10-K for the year ended Dec. 31, 2003.
Detailed financial information follows:
-- more --
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three Months Ended September 30, Percent
2004 2003 Change
Revenues
Passenger - American Airlines $3,838 $ 3,805 0.9
- Regional Affiliates 488 399 22.3
Cargo 149 135 10.4
Other revenues 287 266 7.9
Total operating revenues 4,762 4,605 3.4
Expenses
Wages, salaries and benefits 1,696 1,693 0.2
Aircraft fuel 1,056 701 50.6
Depreciation and amortization 317 345 (8.1)
Other rentals and landing fees 295 302 (2.3)
Commissions, booking fees
and credit card expense 288 281 2.5
Maintenance, materials
and repairs 265 223 18.8
Aircraft rentals 152 165 (7.9)
Food service 145 160 (9.4)
Other operating expenses 593 594 (0.2)
Special charges (credits) (18) (24) (25.0)
Total operating expenses 4,789 4,440 7.9
Operating Income (Loss) (27) 165 *
Other Income (Expense)
Interest income 19 20 (5.0)
Interest expense (219) (198) 10.6
Interest capitalized 22 17 29.4
Miscellaneous - net (9) (3) *
(187) (164) 14.0
Income (Loss) Before Income Taxes (214) 1 *
Income tax - - -
Net Earnings (Loss) $ (214) $ 1 *
Basic and Diluted Earnings
(Loss) Per Share $(1.33) $ 0.00
Number of Shares Used in Computation
Basic 161 159
Diluted 161 181
* Greater than 100%
AMR CORPORATION
OPERATING STATISTICS
(Unaudited)
Three Months Ended
September 30, Percent
2004 2003 Change
American Airlines, Inc. Mainline Jet Operations
Revenue passenger miles (millions) 34,659 32,718 5.9
Available seat miles (millions) 44,515 43,021 3.5
Cargo ton miles (millions) 529 485 9.1
Passenger load factor 77.9% 76.0% 1.9 pts.
Passenger revenue yield per
passenger mile (cents) 11.07 11.63 (4.8)
Passenger revenue per available
seat mile (cents) 8.62 8.84 (2.5)
Cargo revenue yield per ton
mile (cents) 28.11 27.86 0.9
Operating expenses per available seat
mile, excluding Regional
Affiliates (cents) (1) 9.68 9.43 2.7
Fuel consumption (gallons,
in millions) 773 772 0.1
Fuel price per gallon (cents) 125.4 85.0 47.5
Regional Affiliates
Revenue passenger miles (millions) 1,959 1,463 33.9
Available seat miles (millions) 2,840 2,190 29.7
Passenger load factor 69.0% 66.8% 2.2 pts.
AMR Corporation
Average Equivalent Number of Employees
American Airlines 80,300 81,300
Other 13,000 11,500
Total 93,300 92,800
(1) Excludes $539 million and $441 million of expense incurred
related to Regional Affiliates in 2004 and 2003, respectively.
AMR Corporation
Impact of Fuel Price Variance
Average fuel price per gallon (cents)
Three months ended September 30, 2004 125.9
Three months ended September 30, 2003 85.1
Change in price (cents) 40.8
2004 consumption (gallons, in millions) x 838
Impact of fuel price variance (in millions) $ 342
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Nine Months Ended September 30, Percent
2004 2003 Change
Revenues
Passenger - American Airlines $11,411 $ 10,743 6.2
- Regional Affiliates 1,413 1,112 27.1
Cargo 452 409 10.5
Other revenues 828 785 5.5
Total operating revenues 14,104 13,049 8.1
Expenses
Wages, salaries and benefits 5,039 5,660 (11.0)
Aircraft fuel 2,781 2,077 33.9
Depreciation and amortization 963 1,027 (6.2)
Other rentals and landing fees 901 891 1.1
Commissions, booking fees
and credit card expense 863 796 8.4
Maintenance, materials
and repairs 741 641 15.6
Aircraft rentals 458 532 (13.9)
Food service 421 460 (8.5)
Other operating expenses 1,775 1,863 (4.7)
Special charges (credits) (49) 77 *
U.S. government grant - (358) *
Total operating expenses 13,893 13,666 1.7
Operating Income (Loss) 211 (617) *
Other Income (Expense)
Interest income 47 41 14.6
Interest expense (648) (580) 11.7
Interest capitalized 60 54 11.1
Miscellaneous - net (44) (15) *
(585) (500) 17.0
Loss Before Income Taxes (374) (1,117) (66.5)
Income tax - - -
Net Loss $ (374) $(1,117) (66.5)
Basic and Diluted Loss Per Share $(2.33) $ (7.08)
Number of Shares Used in Computation
Basic and Diluted 160 158
* Greater than 100%
AMR CORPORATION
OPERATING STATISTICS
(Unaudited)
Nine Months Ended
September 30, Percent
2004 2003 Change
American Airlines, Inc. Mainline Jet Operations
Revenue passenger miles (millions) 98,271 90,736 8.3
Available seat miles (millions) 131,109 123,861 5.9
Cargo ton miles (millions) 1,617 1,468 10.1
Passenger load factor 75.0% 73.3% 1.7 pts.
Passenger revenue yield per
passenger mile (cents) 11.61 11.84 (1.9)
Passenger revenue per available
seat mile (cents) 8.70 8.67 0.3
Cargo revenue yield per ton
mile (cents) 27.92 27.86 0.2
Operating expenses per available seat
mile, excluding Regional
Affiliates (cents) (1) 9.56 10.12 (5.5)
Fuel consumption (gallons,
in millions) 2,276 2,224 2.3
Fuel price per gallon (cents) 112.7 87.3 29.1
Regional Affiliates
Revenue passenger miles (millions) 5,355 4,017 33.3
Available seat miles (millions) 7,958 6,286 26.6
Passenger load factor 67.3% 63.9% 3.4 pts.
(1) Excludes $1.5 billion and $1.3 billion of expense incurred
related to Regional Affiliates in 2004 and 2003, respectively.
###
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