American Loses $214 In Third Quarter, Promises Layoffs

Even a tourniquet may not be enough to stop the bleeding at American Airlines. This week, the company posted a $214 million loss for the third quarter of 2004. Things are looking a little dim in Fort Worth these days.

"The harsh reality is that, despite our tremendous progress to date, our cost structure remains too high for us to succeed in a world where the price of oil is at such an extraordinary level," said AMR CEO Gerard Arpey.

American says it will soon begin layoffs, but didn't offer any details in Wednesday's quarterly statement.

Ironically, analysts told Reuters that American would have made a 20-percent gain in profitability, had it not been for a sharp spike in fuel prices.

"Excluding fuel, AMR's core profitability increased 20 percent," wrote J.P. Morgan's Jamie Baker in the course of researching AMR. "Admittedly a moot analysis in the face of $55 oil, though highly relevant should oil prices ultimately moderate."

American's financial woes are having a ripple effect in the industry. The airline has canceled an order for 18 Embrear ERJ-145 aircraft. And remember that pledge of more legroom in coach? Faggedaboutit. AAL is adding more coach seats to its MD-80s, 737s, 767s and 777s.

The airline is also cutting back on capacity, which, along with high fuel costs has plagued the industry since it's massive 2001 downturn. By the first quarter of next year, AAL plans to cut about five percent of its passenger seats, partly by trimming back flights to markets served by two airports.

FMI: www.aa.com