In Spite of Economic Challenges, Arpey Says Company Continues to Confront Difficulties Head On with Continued Capacity Discipline, Fleet Renewal and Customer Service Efforts
NEW YORK, June 11 /PRNewswire-FirstCall/ -- Even as it faces significant economic challenges, AMR Corporation (NYSE: AMR) continues to confront today's difficulties head on while remaining focused on the long term, Chairman and CEO Gerard Arpey said today.
Arpey, speaking at the Bank of America-Merrill Lynch 2009 Global Transportation Conference, said that AMR, the parent company of American Airlines, Inc., is taking additional steps in response to a difficult demand environment, moving ahead with narrowbody fleet replacement, and continuing to see results from efforts to improve customer experience.
While continued investments in the Company's facilities, fleet, products and services reflect "... our confidence in our long-term strategy," Arpey said, "We are not sugarcoating the magnitude of what we - along with every other airline - are up against today in this economic climate. Just the opposite. Our confidence also stems from our long list of competitive strengths, our proven resilience, and the fact that despite formidable obstacles, we are executing well on a number of fronts today. We are running an airline our customers can depend on, delivering the products and services they value, and building a fleet and a network and a partnership grouping that will serve our customers and our company well for many years to come."
Highlights from Arpey's speech include:
AMR plans to reduce mainline seating capacity, measured by Available Seat Miles, by 7.5 percent in 2009 versus 2008, compared to previous expectations for a 6.5 percent year-over-year decline. These additional reductions represent a decline in mainline capacity for the second half of the year of about 2.0 percentage points beyond the Company's previous guidance given on April 15, 2009 - made up of a decline of approximately 1.0 percentage point in domestic capacity and approximately 3.5 percentage points in international capacity versus prior guidance. As a result, in the second half of 2009 AMR expects mainline domestic capacity to decline by approximately 7.5 percent and international capacity to decline by 5.5 percent compared to the second half of 2008.
With these latest changes, the Company's second-half 2009 mainline domestic and international capacity will be down approximately 15.5 percent and 5.5 percent, respectively, compared to the same period in 2007. (For more information about the Company's capacity guidance, see chart at the end of the release).
"Capacity discipline has been our mantra for many years, and it has been one of the keys to our ability to navigate our way through the industry's many storms," Arpey said. "The cuts we implemented last year have been helpful, and as a result, we did not make major changes to our summer schedule. But looking forward, we think an adjustment to our fall schedule is warranted, so we are making additional cuts beginning in late August."
Arpey noted that the Company will closely monitor demand trends and will remain responsible and disciplined in trying to keep supply and demand in reasonable balance, while preserving the competitive strength and revenue-generating power of its global network.
Arpey cited American's efforts to strengthen its global reach by building a presence in China and India and by expanding its reach into new markets, such as Barcelona and Milan. Arpey also added that he is more enthusiastic than ever about the progress the oneworld® Alliance, of which American is a founding member, is making in becoming the world's premier global alliance, and he said he remains optimistic that American's immunity application with British Airways, Iberia, Finnair, Malev and Royal Jordanian Airlines will be approved by year's end.
In addition, Arpey noted that the Company continues to make prudent investments in its fleet and facilities, such as modifications to its 767-200 aircraft, a reconfiguration of 757s for international use and upgrades to Admirals Clubs in Boston, Washington Dulles, and London Heathrow. American also is taking another step forward in its plan to replace its narrowbody fleet with Boeing 737-800s, which are 35 percent more fuel efficient per seat than the MD-80s they will replace. Based on an update to its agreement with Boeing, American now plans to take delivery of eight additional 737s, with a modified delivery schedule that includes 76 737s in 2009 and 2010, including planes it has received, and eight 737s in 2011.
Subject to certain terms and conditions, American continues to have committed financing in place for its 2009 and 2010 deliveries well into the second half of 2010.
American also continues to deliver improved results in dependability and customer experience, Arpey said. Through the first five months of 2009, American's "A+14" on-time performance, measured by U.S. Department of Transportation, improved by 13 percentage points while its completion factor improved by about 2.5 percentage points, due to fewer cancelled flights, compared to the same period in 2008.
"Being able to deliver what our customers value most, across such a broad spectrum of wants and needs, is challenging," Arpey said. "All told, our overall customer satisfaction scores reflect excellent progress on virtually every front we measure in trying to hit that outcome."
While significant hurdles remain in the near term, Arpey said the Company and its employees remain focused on its long-term strategy. "You never know where your next challenge is going to come from - and you better bake a lot of flexibility and resilience into your plans. More importantly, the best way to prepare for tomorrow's challenges is to confront today's challenges head on, all the while keeping focus on the long-term direction. And that's exactly what we are doing," he said.
Year over Year Capacity Forecast vs. Prior Guidance Change Change 2H09 FY 2H09 (pts) FY (pts) Mainline (7.0%) (2.0) pts (7.5%) (1.0) pts Domestic (7.5%) (1.0) pts (9.0%) -- International (5.5%) (3.5) pts (4.5%) (2.0) pts Consolidated (7.0%) (2.0) pts (7.5%) (1.0) pts Note: All numbers approximate
Statements in this 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 release, the words "expects," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals are 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; the amounts of its unencumbered assets and other sources of liquidity; fleet plans; overall economic and industry conditions; plans and objectives for future operations; regulatory approvals and actions, including the Company's application for antitrust immunity with other oneworld alliance members; 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. Guidance given in this release regarding capacity, fuel consumption, fuel prices, fuel hedging, and unit costs, and statements regarding expectations of regulatory approval of the Company's application for antitrust immunity with other oneworld members, are forward-looking statements.
Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's 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: the materially weakened financial condition of the Company, resulting from its significant losses in recent years; weaker demand for air travel and lower investment asset returns resulting from the severe global economic downturn; the Company's need to raise substantial additional funds and its ability to do so on acceptable terms; the ability of the Company to generate additional revenues and reduce its costs; continued high and volatile fuel prices and further increases in the price of fuel, and the availability of fuel; the Company's substantial indebtedness and other obligations; the ability of the Company to satisfy existing financial or other covenants in certain of its credit agreements; changes in economic and other conditions beyond the Company's control, and the volatile results of the Company's operations; the fiercely and increasingly competitive business environment faced by the Company; potential industry consolidation and alliance changes; competition with reorganized carriers; low fare levels by historical standards and the Company's reduced pricing power; changes in the Company's corporate or business strategy; government regulation of the Company's business; conflicts overseas or terrorist attacks; uncertainties with respect to the Company's international operations; outbreaks of a disease (such as SARS or avian flu) that affects travel behavior; labor costs that are higher than those of the Company's competitors; uncertainties with respect to the Company's relationships with unionized and other employee work groups; increased insurance costs and potential reductions of available insurance coverage; the Company's ability to retain key management personnel; potential failures or disruptions of the Company's computer, communications or other technology systems; losses and adverse publicity resulting from any accident involving our aircraft; changes in the price of the Company's common stock; and the ability of the Company to reach acceptable agreements with third parties. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K for the year ended December 31, 2008.
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SOURCE: AMR Corporation
Web site: http://www.aa.com/