AMR Chairman and CEO Gerard Arpey Says World's Largest Airline Is Better Prepared to Manage through Today's Uncertainty than it was Several Years Ago
Gerard Arpey, Chairman and Chief Executive Officer of AMR Corporation , the parent company of American Airlines, Inc., said today that the world's largest airline continues to tackle "head on" the challenges of record fuel prices and economic concerns and is much better positioned than it was several years ago to manage through the current industry uncertainty.
"As always, we are facing up to our challenges directly, tackling them head on, and we remain confident in our ability to work our way through this difficult period and toward a brighter future for our company," Arpey said while speaking at the Merrill Lynch Global Transportation Conference.
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AMR expects to end the second quarter of 2008 with more than $5 billion in total cash and short-term investments, including a restricted balance of approximately $426 million. AMR's balance sheet improvement in recent years, including debt reduction and improved liquidity, offers "increased flexibility to do what is necessary to position American for long-term success," Arpey said.
Arpey also noted that AMR has approximately $5 billion in unencumbered assets and sources of liquidity beyond its cash balance, "and we'll continue to take a close look at appropriate cash levels."
As it continues to find ways to dampen the impact of record fuel prices, AMR is currently 36 percent hedged at $2.38 per gallon (at an average cap of $70 per barrel WTI crude) in the second quarter and 33 percent hedged at $2.55 per gallon (at an average cap of $78 per barrel WTI crude) for 2008.
In addition, Arpey added, American still expects to take delivery of 70 more-fuel-efficient Boeing 737-800 aircraft in 2009 and 2010 as it begins to replace its MD-80 fleet, "and we continue to evaluate whether to move at an even brisker pace." AMR also is considering an accelerated retirement schedule for its A300 fleet given the current environment, Arpey said.
AMR also continues to look for new revenue opportunities through fare increases as well as through the implementation of new or additional fees for certain services. In addition, the company also receives revenue benefits through marketing partnerships. Arpey noted that AMR recently signed a new multi-year contract with Citibank, its valued AAdvantage program partner, "and we expect to see some of the benefits of this new agreement immediately, with the full benefits being phased in by 2010."
AMR also said Wednesday that second quarter 2008 mainline unit revenue is expected to increase between 6.0 percent and 7.0 percent year over year, and that second quarter 2008 consolidated unit revenue is expected to increase between 5.9 percent and 6.9 percent versus year-ago results.
"Despite our best efforts, fares are not, however, keeping pace with the meteoric rise in fuel prices, but in spite of our continued concerns about the economy, our revenue results have held up reasonably well," Arpey said.
As part of its efforts to reduce costs and create a more sustainable supply-and-demand balance in the market, AMR on May 21 said it will reduce fourth quarter 2008 mainline domestic capacity by 11 percent to 12 percent and regional affiliate capacity by 10 percent to 11 percent versus fourth quarter 2007 levels.
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; fleet plans; overall economic and industry conditions; plans and objectives for future operations; 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.
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; the ability of the Company to generate additional revenues and reduce its costs; changes in economic and other conditions beyond the Company's control, and the volatile results of the Company's operations; 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; continued high and volatile fuel prices and further increases in the price of fuel, and the availability of fuel; the fiercely and increasingly competitive business environment faced by the Company; industry consolidation; competition with reorganized carriers; low fare levels by historical standards and the Company's reduced pricing power; the Company's need to raise additional funds and its ability to do so on acceptable terms; 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; 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, 2007.
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