American Airlines 737-800. Photo: By Rob Finlayson.

American Airlines parent AMR Corp. on Wednesday reported a first-quarter net loss of $436 million, narrowed from a $505 million net deficit in the year-ago period, and announced a further capacity reduction in the 2011 fourth quarter.

The only US major to incur a loss in 2010 (ATW Daily News, Feb. 21) cited high fuel costs in explaining the red ink, but noted that its results were improved year-over-year. "High fuel prices remain one of the biggest challenges to our industry and our company," Chairman and CEO Gerard Arpey said in a statement. "We believe our steps to aggressively increase revenues, reduce capacity, control non-fuel operating costs, and bolster liquidity will help us to better manage the challenges we currently face. While we clearly must achieve better results as we continue to strengthen our business, we have made some meaningful progress."

To help manage the high fuel cost environment, AA said it will reduce fourth-quarter system capacity by a further 1%. AA had already lowered its full-year 2011 consolidated capacity growth projection to 3.3% from 4.3% (ATW Daily News, March 2). Now it is projecting full-year consolidated capacity to be up 2.8% over 2010. It said it will retire "at least" 25 MD-80s by year end. It expects full-year mainline capacity to be up 2.2%, 1.4 percentage points lower than originally planned. Domestic mainline capacity will be down 0.5% and international capacity up 6.2% compared to 2010, the airline stated.

First-quarter revenue rose 9.2% year-over-year to $5.53 billion while expenses heightened 7.4% to $5.77 billion, including a 24.8% surge in fuel costs to $1.84 billion. Operating loss was $232 million, narrowed from an operating loss of $298 million in the 2010 March quarter. Mainline traffic increased 1.6% to 29.17 billion RPMs on a 2.7% lift in capacity to 37.85 billion ASMs, producing a load factor of 77.1%, down 0.8 point. Passenger yield rose 6.2% to 14.18 cents as PRASM increased 5% to 10.92 cents and CASM heightened 3.8% to 13.4 cents.