AMR posts $504 million 2007 profit despite fourth-quarter loss

American Airlines parent AMR Corp. reported full-year 2007 net income of $504 million, more than double the $231 million earned in the prior year, despite a fourth-quarter net loss of $69 million that it attributed largely to "record fuel prices."

The quarterly loss was reversed from a profit of $17 million in the year-ago period and ended the carrier's streak of six straight quarters in the black. But Chairman and CEO Gerard Arpey noted that AMR posted back-to-back profitable years for the first time since 1999-2000 despite "enormous challenges from unprecedented weather disruptions, air traffic control problems and record fuel prices."

Full-year operating revenue increased 1.6% to $22.94 billion while expenses rose 2.2% to $21.97 billion, producing operating income of $965 million, down 9% from $1.06 billion in 2006. Full-year mainline traffic declined 0.7% to 138.45 billion RPMs on a 2.4% drop in capacity to 169.91 billion ASMs, producing a load factor of 81.5%, up 1.4 points. Passenger yield grew 2.8% to 13.17 cents as PRASM lifted 4.6% to 10.73 cents and CASM increased 4.4% to 11.38 cents.

Executive VP-Finance and Planning and CFO Tom Horton said AMR will look to offset fuel costs by targeting $150 million in cost cuts in 2008 and keeping capacity growth to a minimum. "High fuel prices are a serious concern for the future," he said yesterday during a conference call with analysts and reporters. "We continue to take a very measured approach to capacity."

The airline will take delivery of no new aircraft in 2008 and plans to grow mainline capacity by just 1% year-over-year. The small rise will occur only because weather forced AA to operate fewer flights than planned in 2007; capacity growth actually will be flat on a schedule-on-schedule basis.

Horton said earning profits in the face of "sharply higher fuel costs" is challenging because US airlines continue to have little pricing power, noting that AA's average fare in the first 11 months of 2007 was actually lower than its average fare in 2000. "We continue to be frustrated by our inability to take this enormous fuel burden and put the cost where it belongs: On our customers," he said. AA expects to pay an average of $2.65 per gal. of jet fuel in 2008, up 25% over $2.12 in 2007.

AMR's net debt at the end of 2007 was $11 billion, down 19% from $13.6 billion at the end of 2006.