Airline parent seeks new credit line because of sluggish finances
Thursday, September 23rd 2004, 11:02 am
By: News On 6
DALLAS (AP) _ Amid poor financial performance, the parent of American Airlines Inc. is reportedly in discussions with banks to replace an $834 million credit line.
Officials of AMR Corp. also said in a U.S. Securities and Exchange Commission filing on Wednesday that August revenue fell short of expectations because of intense competition and hurricanes.
With Fort Worth, Texas-based American's total debt load exceeding $22 billion including aircraft leases, the carrier needs to increase profit to service that debt, according to The Dallas Morning News' Thursday editions.
Airline officials said AMR's cash balance of $3.6 billion meets the minimum required under its existing credit line, but its financial results won't meet a provision in its loan agreement regarding the ratio of its pretax earnings to debt payments.
Now, AMR wants to refinance or replace the loan.
``While American believes that it will be able to obtain the replacement facility loan on acceptable terms, there can be no assurance that American will be able to do so,'' the airline stated in the filing.
Finances for AMR, which avoided bankruptcy last spring and reduced its annual costs by $4 billion, remain fragile. In the filing, the company said September revenue will be hurt even more by the series of strong storms that hit Florida and the Gulf Coast.
As a result of AMR's disclosure, J.P. Morgan analyst Jamie Baker lowered his third-quarter estimate for the company from a loss of 30 cents a share to a loss of $1.70. Baker also lowered his fourth-quarter estimate from a loss of $1.40 to a loss of $2.
Revenue for AMR's third quarter, including American and regional affiliate American Eagle, will be down as much 2.7 percentage points, as measured in seat miles flown.
American, in response to high fuel prices, raised its fares $5 each way on Wednesday in another attempt to pass costs along to travelers. But major carriers' earlier attempts to raise fares have failed. Other carriers are still considering matching the latest increase.
Gerard J. Arpey, chairman and chief executive of both American and parent AMR, was scheduled to address analysts Thursday in New York.