AMR reports 20% increase in second-quarter profits

Thursday, July 20th 2000, 12:00 am

By: News On 6

Profits at AMR Corp. soared 20 percent in the second quarter as the Fort Worth-based parent of American Airlines Inc. benefited from strong passenger traffic, higher air fares, a competitor's problems and the sale of its stake in Priceline.com.

AMR said Wednesday that net income during the quarter jumped to $321 million, or $1.96 a diluted share, from $268 million, or $1.70, in the year-ago period.

The second-quarter 1999 net income includes $52 million from Sabre Holdings Corp., which AMR spun off in March.

Excluding a $36 million after-tax gain from the sale of its warrants on stock in Priceline.com, AMR's second-quarter net income rose 6 percent to $285 million, or $1.75. The results beat analysts' expectations of $1.57 a share.

"If the economy is slowing down, we haven't yet seen it in the airline business," said Thomas Horton, AMR's senior vice president of finance and chief financial officer.

Mr. Horton would not comment about the state of merger talks between American and Northwest Airlines Inc.

"We run this company with financial discipline and always have," he said. "We are not going to do anything that's going to conflict with this.

"Airline mergers are very, very complex from both a labor and regulatory standpoint, and that is something we are keeping top-of-mind as we evaluate our strategic alternatives."

Despite AMR's rosy results, investors pummeled airline stocks after UAL Corp., the parent company of United Airlines Inc., lowered earnings estimates for the third quarter and the full year.

AMR's stock fell $1.38 a share to $31.50.

UAL's stock plunged $6 or 10 percent to $53.25.

Unlike previous periods of strong demand, airlines have resisted the impulse to flood the market with seats, eventually lowering fares.

In fact, American and United are taking seats out to add legroom for passengers.

During the second quarter, AMR's total operating revenue climbed 10 percent to $5 billion from $4.5 billion in the year-ago period.

Higher air fares and fuller planes helped offset a 37 percent increase in American's jet fuel costs, an airline's biggest expense after labor.

The world's second largest airline also saw an improvement in its international operations, thanks to a strong economy and the elimination of three unprofitable routes, including Dallas/Fort Worth-Manchester, England.

In addition, American estimated that it gained $10 million to $15 million from an unusual number of cancellations experienced by archrival United Airlines Inc. during the quarter.

United pilots are negotiating a new labor contract with the airline, and many have refused to fly overtime.

American had expected a negative effect on second-quarter earnings from its effort to expand legroom by removing two rows of seats from each of its 712 planes, Mr. Horton said.

That didn't happen, he said, although he wouldn't specify the program's effect.

By the end of June, 520 of the carrier's planes contained the extra space.

American's second-quarter profit echoed similar strong results reported Tuesday by Dallas-based Southwest Airlines Co. and Houston-based Continental Airlines Inc.

Here is a summary of financial performance announced Wednesday by other major carriers:

â€¢ UAL Corp.: Net income slid 51 percent to $370 million, or $3.14 a share, from $761 million, or $6.27, in the year-ago period.

But excluding one-time charges and/or gains in both quarters, UAL earned $408 million, or $3.47 a share, a 17 percent increase from $349 million, or $2.86, in the year-ago period.

The results exceeded analysts' estimates of $3.24 a share.

Although operating revenue climbed 13 percent to $5.1 billion, UAL, based in the Chicago suburb of Elk Grove Township, warned that its third-quarter and full-year results would fall short of analysts' expectations because of a reduction in flights and higher labor costs.

United is the world's largest airline.

â€¢US Airways Group Inc.: The nation's sixth-largest carrier lost $80 million, or $1.17 a share in the second quarter, down significantly from a loss of $317 million, or $4.26, in the year-ago period.

Operating revenue rose 6.4 percent to $2.4 billion.

During the second quarter, US Airways Inc., whose purchase by UAL is pending, suffered from high jet fuel costs and the negative effect of a potential strike by the airline's flight attendants at the end of the first quarter.

The carrier, based in Arlington, Va., saw its stock end the day at $40.94, down $1.06 a share.

â€¢ Trans World Airlines Inc.: The country's eighth-largest carrier narrowed its loss in the second quarter to $4.2 million, or 8 cents a share, from a loss of $6.2 million, or 18 cents, in the year-ago period.

The results beat analysts' estimates of a loss of 33 cents a share.

Operating revenue at the St. Louis-based carrier increased 10 percent to $954.9 million.

TWA's stock inched up 13 cents a share to close at $2.44.