Or, When Hemorrhaging $375 Million Is Cause To Celebrate

When is a $375 million quarterly loss seen as good news? The answer is, when most everyone expected that loss to surpass $400 million.

American Airlines surprised investors Wednesday by posting a lower-than-expected $375 million net loss for the first quarter of 2009. That works out to a $1.35 per-share hit, and surpassed the $341 million loss the Fort Worth, TX-based airline reported in the same period in 2008. But, again, most analysts expected the news to be worse.

In fact, Bloomberg reports the stock market responded quite positively to the news, driving shares in parent company AMR Corp. up to the highest levels since October 2008 in midday trading. At 12:24 pm Wednesday, AMR stock was listed at $4.98 per share, after briefly touching $5.14.

Shares were further buoyed by the news American expects traffic numbers to rise this summer, as well as the news the carrier's operating costs plummeted more than forecast, helped by a 30 percent drop in the cost of jet fuel.

American also told 4,800 of its line employees it would delay planned layoffs next month, on the belief stronger traffic numbers will justify their services.

"Since first quarter was better than our forecast, perhaps second quarter won’t be as bad either," said UBS AG analyst Kevin Crissey, who has a "buy" rating on AMR stock.

American also proudly noted its customer satisfaction rating, as aggregated by the Department of Transportation, climbed nearly 15 percentage points over Q1 2008, to 78.1 percent approval in the first quarter of 2009.

That's pretty much it for the good news, though. The loss reported Wednesday is American's fifth deficit in the past six quarters... and comes thanks to the largest decrease in sales since the dark days of 2002. The world's second-largest carrier also reported a 12 percent drop in passenger traffic, far outpacing the planned 6.5 percent capacity decrease expected this year among domestic and international routes.

"The struggling economy and capital markets remain significant challenges for American and the rest of the industry," said AMR CEO Gerard Arpey. "Our 2009 outlook remains challenging."

FMI: www.aa.com