American Airlines swung to a quarterly loss on Wednesday and warned that sharply rising fuel prices would put pressure on earnings in the coming year, triggering the largest drop in its share price for more than three months.
During the past two years, most airlines have returned to profitability thanks to a moderate global economic recovery, a strong rebound in demand for travel and significant reductions in capacity that have allowed companies to raise ticket prices.
However American, the third-largest US airline by revenues, lagged behind its peers in 2010, held back by higher than average labour costs and a significant debt overhang. Analysts expect it to be the only large US airline to report a loss in the fourth quarter.
At the same time, American is involved in a potentially damaging dispute with the companies that sell and distribute its tickets – a dispute that could substantially raise the carrier’s costs and cause it to lose billions of dollars in revenues.
Gerard Arpey, chief executive of American, said the company was making progress. “A loss of any size is always disappointing,” he said in a letter to staff but he added that the losses had declined since the start of the year.
For the three months to the end of 2010, American lost $97m, or 29 cents a share, compared with $344m, or $1.03 a share, in the same period a year earlier. Excluding one-off charges the results topped Wall Street estimates.
Revenues climbed 10 per cent to $5.6bn thanks to higher ticket prices and fuller planes. “The economic recovery is real, albeit fragile, and our network is much stronger than it was a year ago,” Mr Arpey said.
American said next year its fuel bill could increase by more than $1bn if price trends continue.
At the close of trading in New York, shares in AMR Corp, American’s parent company, had fallen 7.2 per cent to $7.69.